UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
Optika Inc.
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(Name of Issuer)
Common Stock (Par Value $ 0.001 Per Share)
(Upon Conversion of Series A Convertible Preferred
Stock and Exercise of Warrants)
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(Title of Class of Securities)
6839731 10 1
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(CUSIP Number)
F. William Reindel David A. Baylor
Fried, Frank, Harris, Shriver & Jacobson One Montgomery Street
One New York Plaza Suite 3700
New York, NY 10004 San Francisco, CA 94101
(212) 859-8000 (415) 364-2500
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(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications)
February 23, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box |_|.
*The remainder of this cover page will be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page will not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but will be subject to all other provisions of the
Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 6839731 10 1
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THOMAS WEISEL PARTNERS GROUP LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0
10 SHARED DISPOSITIVE POWER
987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.5% (17.4% AFTER EIGHT YEARS)**
14 TYPE OF REPORTING PERSON
OO - HC
* Represents the number of shares of Common Stock into which the Series
A Preferred Stock and Warrants held by the Reporting Person are
initially convertible or exercisable (and the number of such shares
into which such securities are convertible or exercisable on the
eighth anniversary of the issue date assuming that the Series A
Preferred Stock is not earlier converted or redeemed).
** Represents percent of class outstanding, initially and after eight
years, based on 7,589,129 shares of Common Stock issued and
outstanding as represented by the Issuer in the Securities Purchase
Agreement (defined herein).
<PAGE>
SCHEDULE 13D
CUSIP No. 6839731 10 1
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THOMAS WEISEL CAPITAL PARTNERS LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0
10 SHARED DISPOSITIVE POWER
987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
987,191 (1,594,138 SHARES AFTER EIGHT YEARS)*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.5% (17.4% AFTER EIGHT YEARS)**
14 TYPE OF REPORTING PERSON
OO
* Represents the number of shares of Common Stock into which the Series
A Preferred Stock and Warrants held by the Reporting Person are
initially convertible or exercisable (and the number of such shares
into which such securities are convertible or exercisable on the
eighth anniversary of the issue date assuming that the Series A
Preferred Stock is not earlier converted or redeemed.
** Represents percent of class outstanding based on 7,589,129 shares of
Common Stock issued and outstanding as represented by the Issuer in
the Securities Purchase Agreement (defined herein).
<PAGE>
SCHEDULE 13D
CUSIP No. 6839731 10 1
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THOMAS WEISEL CAPITAL PARTNERS, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 854,212 (1,379,401 SHARES AFTER EIGHT YEARS)*
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0
10 SHARED DISPOSITIVE POWER
854,212 (1,379,401 SHARES AFTER EIGHT YEARS)*
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
854,212 (1,379,401 SHARES AFTER EIGHT YEARS)*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.1% (15.4% AFTER EIGHT YEARS)**
14 TYPE OF REPORTING PERSON*
PN
* Represents the number of shares of Common Stock into which the Series
A Preferred Stock and Warrants held by the Reporting Person are
initially convertible or exercisable (and the number of such shares
into which such securities are convertible or exercisable on the
eighth anniversary of the issue date assuming that the Series A
Preferred Stock is not earlier converted or redeemed.
** Represents percent of class outstanding based on 7,589,129 shares of
Common Stock issued and outstanding as represented by the Issuer in
the Securities Purchase Agreement (defined herein).
<PAGE>
ITEM 1. SECURITY AND ISSUER.
-------------------
This statement on Schedule 13D relates to the common stock, par
value $.001 per share (the "Common Stock") of Optika Inc., a Delaware
corporation (the "Company"). All capitalized terms not otherwise defined
herein have the meaning given to them in the Securities Purchase Agreement
(as defined below). The principal executive offices of the Company are at
7450 Campus Drive, 2nd Floor, Colorado Springs, Colorado 80920.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
This statement is being filed by Thomas Weisel Capital Partners,
L.P. ("TWCP L.P."), Thomas Weisel Capital Partners LLC ("TWCP LLC") which
is the general partner of TWCP L.P. and certain other investment limited
partnerships (the "Other Partnerships" and, together with TWCP L.P., the
"Limited Partnerships"), and Thomas Weisel Partners Group LLC ("TW Group"
and, together with TWCP L.P. and TWCP LLC, the "Filing Persons").1
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1 Neither the present filing nor anything contained herein will be
construed as an admission that any Filing Person constitutes a
"person" for any purpose other than for compliance with Section 13(d)
of the Securities Exchange Act of 1934, as amended.
In addition to the Limited Partnerships referenced above, RKB
Capital, L.P. ("RKB") was also a purchaser under the Securities Purchase
Agreement, by and among the Company, the Limited Partnerships and RKB (the
"Securities Purchase Agreement"), which is filed as Exhibit 2 hereto and
incorporated herein by reference.
Each Filing Person is organized under the laws of Delaware. TWCP
L.P. was formed for the purpose of making equity investments in growth
companies. TWCP LLC is a registered investment adviser and the sole general
partner of each of the Limited Partnerships. The managing member of TWCP
LLC is TW Group. TW Group is a holding company that (directly and
indirectly through subsidiaries or affiliated companies or both) is a
privately held investment banking firm. The principal business address of
each Filing Person is One Montgomery Street, Suite 3700, San Francisco,
California 94104. Other than TW Group, which is governed by the executive
committee, the members of which are described below, and other than TWCP
LLC, of which Derek Lemke-von Ammon and Alan B. Menkes (who are also
members of the executive committee of TW Group) are executive officers,
none of the other Filing Persons have executive officers or directors. The
business and affairs of TWCP L.P. and the Other Partnerships are managed by
its general partner, TWCP LLC whose business and affairs are managed by its
managing member TW Group. The business and affairs of TW Group are managed
by the executive committee of TW Group.
The name, business address, present principal occupation or
employment and citizenship of each member of the executive committee of TW
Group are set forth in Schedule I hereto incorporated herein by reference.
During the last five years, none of the Filing Persons, nor, to
the knowledge of each of the Filing Persons, any of the Other Partnerships
or the persons listed on Schedule I (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii)
has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree, or final order enjoining future violations
of, or prohibiting or mandating activities subject to federal or state
securities laws or finding any violation with respect to such laws.
The Filing Persons have entered into a Joint Filing Agreement,
dated as of February 29, 2000, a copy of which is attached hereto as
Exhibit 1. Neither the fact of this filing nor anything contained herein
(including the reference to RKB) shall be deemed an admission by the Filing
Persons that they constitute a "group" as such term is used in Section
13(d)(1)(k) of the rules and regulations under the Securities Exchange Act
of 1934, as amended (together with such rules and regulations, the
"Exchange Act").
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
As more fully described herein, on February 23, 2000 (the
"Closing Date"), the Limited Partnerships purchased (severally and not
jointly), pursuant to the Securities Purchase Agreement (i) an aggregate of
695,258 shares of the Company's Series A Convertible Preferred Stock, par
value $0.001 per share (the "Preferred Stock") and (ii) warrants (the
"Warrants") to purchase an aggregate of 291,933 shares of the Company's
Common Stock for an aggregate purchase price of $14,250,007.97 and RKB
purchased 36,593 shares of Preferred Stock and Warrants to purchase an
aggregate of 15,365 shares of Common Stock for an aggregate purchase price
of $750,010.13.
Neither the individuals listed on Schedule I hereto nor any
Filing Person hereunder beneficially owns any securities of the Company
other than those described above.
The funds used by the Limited Partnerships to purchase the
Preferred Stock and Warrants were obtained by such entities from capital
contributions by their partners and from the available funds of such
entities.
None of the individuals listed on Schedule I hereto has
contributed any funds or other consideration towards the purchase of the
securities of the Company except insofar as they may have partnership
interests in any of the Filing Persons and have made capital contributions
to any of the Filing Persons, as the case may be.
ITEM 4. PURPOSE OF TRANSACTION.
-----------------------
1. General
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The purpose of the acquisition of the Preferred Stock and
Warrants by the Limited Partnerships was to acquire an equity interest in
the Company. The principal terms and conditions of the securities acquired
by the Limited Partnerships and RKB are set forth in the Certificate of
Designation for the shares of Preferred Stock, the Warrant Agreement
providing for the issuance of the Warrants and the Securities Purchase
Agreement.
2. Terms of Preferred Stock
------------------------
Dividends
---------
Under the terms of the Certificate of Designation which is filed
as Exhibit 3 hereto and incorporated herein by reference, so long as any
shares of Preferred Stock remain outstanding, if the Company pays a
dividend (cash or otherwise) on shares of Common Stock, then at the same
time the Company is required to declare and pay a dividend on each share of
Preferred Stock equal (in form and amount) to the dividend that would be
payable on the shares of Common Stock into which such share of Preferred
Stock may be converted on the record date for such dividends (or if no
record date is established, at the date such dividend is declared). There
are no other dividends payable with respect to the Preferred Stock.
Liquidation Event
-----------------
If the Company shall liquidate, dissolve or wind-up (a
"Liquidation"), holders of Preferred Stock are entitled to receive for each
share of Preferred Stock the greater of the Liquidation Preference (as
defined below) as of the date of Liquidation for such share and the amount
the holder of such share of Preferred Stock would have received upon such
Liquidation if such shares were converted immediately prior to such
Liquidation into shares of Common Stock. The "Liquidation Preference" is
$20.496 per share (as adjusted for any stock dividends, combinations or
splits with respect to such share) at the date of such issuance of the
Preferred Stock (the "Closing") plus an amount equal to dividends thereon
which are deemed to cumulate and accrue from and after the date of issuance
of such share at a rate of 8% per annum, compounded semi-annually on each
six month anniversary after the Closing Date.
Other Liquidation Event
-----------------------
If the Company shall (i) dispose, lease or sell substantially all
of its assets to any person, (ii) consummate a transaction, other than a
Public Company Liquidation Event, as defined below, in which a person or
group (as defined under Sections 13(d) and 14(d) of the Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act) of more than 50% of the voting power of the Company
or (iii) cause a recapitalization of the Company involving an extraordinary
distribution or dividend to the holders of Common Stock then the Company is
required to offer to repurchase all outstanding shares of Preferred Stock
for an amount in cash per share of Preferred Stock equal to the greater of
the (x) then current Liquidation Preference of the Preferred Stock and (y)
the amount a holder of each share would be entitled to receive on a
Liquidation in respect of the aggregate number of shares of Common Stock
into which such share of Preferred Stock is then convertible assuming that
such transaction constitutes a Liquidation for these purposes. If the
Company shall consummate a transaction which is the same as described in
(ii) above and the consideration to be paid to the holders of Common Stock
consists solely of common stock of a corporation which has an aggregate
public float (as determined under the Certificate of Designation) of at
least $250 million (a "Public Company Liquidation Event") and the shares of
which are listed on a national exchange or freely tradeable without
restrictions, then the Company shall offer to repurchase all outstanding
shares of Preferred Stock for an amount in cash per share of Preferred
Stock equal to the Liquidation Preference of the Preferred Stock then in
effect.
Conversion
----------
Under the terms of the Certificate of Designation, the holders of
Preferred Stock shall have the right following the Closing Date at any time
in whole and from time to time in part, at such holder's option, to convert
any or all outstanding shares of Preferred Stock into a number of shares of
Common Stock, determined by dividing the Liquidation Preference as of the
conversion date by $20.496, subject to customary anti-dilution adjustments.
As a result of such conversion rights, the total shares of Preferred Stock
issued to the Limited Partnerships on the Closing Date are convertible into
695,258 shares of Common Stock and, assuming the Preferred Stock is not
earlier redeemed or converted, 1,302,205 shares of Common Stock on the
eighth anniversary of the issue date.
Redemption
----------
Under the terms of the Certificate of Designation, the Company
shall at any time following the first anniversary of the Closing Date, have
the right to redeem all, but not less than all, of the then outstanding
shares of Preferred Stock within seventy (70) days following any date for
which the market price per share of Common Stock for each of at least
twenty (20) out of twenty-two (22) consecutive trading days preceding such
date is equal to or greater than $40.992 (subject to appropriate
adjustments). Any such redemption must be effected for an amount in cash
per share of Preferred Stock equal to the Liquidation Preference of the
Preferred Stock then in effect.
Under the terms of the Certificate of Designation, the Company
shall, on the eighth anniversary of the Closing Date (such date, the
"Mandatory Redemption Date") redeem all, but not less than all, of the then
outstanding shares of Preferred Stock. Any such redemption must be effected
for an amount in cash per share of Preferred Stock equal to the Liquidation
Preference of the Preferred Stock then in effect as of the Mandatory
Redemption Date.
3. Terms of Warrants
-----------------
Pursuant to the Warrant Agreement, dated as of the Closing Date,
among the Company, RKB and the Limited Partnerships (the "Warrant
Agreement"), the Company issued Warrants to the Limited Partnerships to
purchase an aggregate of 291,933 shares of Common Stock with an exercise
price of $22.448 per share (such exercise price will be adjusted in
accordance with customary anti-dilution provisions). The Warrant Agreement
permits the Warrants to be exercised at any time in whole and from time to
time in part during the term of the Warrants with a cash payment to the
Company or cashlessly. The Warrants will expire on the eighth anniversary
of the Closing Date.
4. Board Representation; Voting Rights
-----------------------------------
Pursuant to the Certificate of Designation, and for so long as
any of the Preferred Stock is outstanding, the holders of a majority of the
outstanding shares of Preferred Stock shall be entitled to designate one
director for election to the Board of Directors of the Company as a Class I
director and, voting separately as a series, shall have the exclusive right
to vote for the election of such designee to the Board of Directors for so
long as the purchasers under the Securities Purchase Agreement and their
affiliates own in excess of the Ownership Threshold (as defined below). In
the event the Certificate of Designation is no longer in effect, under the
Securities Purchase Agreement, from the Closing Date, and for so long as
the purchasers and their affiliates beneficially own in the aggregate
Preferred Stock, Warrants and Common Stock issuable upon conversion or
exercise thereof representing greater than 15% of the Common Stock
(assuming such conversion and exercise) acquired by the purchasers in the
aggregate at the Closing (and adjusting for stock splits, stock
combinations and like transactions) (such ownership threshold referred to
as the "Ownership Threshold"), TWCP L.P. will continue to have the right to
nominate one director (the "Purchaser's Designee") to the Company's board
of directors. The Company will include such nominee in the slate of
directors recommended by the Company and will use reasonable efforts to
secure the election of such nominee. On the Closing Date, Mr. Alan B.
Menkes, Co-Head of Private Equity of TW Group and a member of the executive
committee thereof, was appointed to the Board of Directors as the
Purchaser's Designee. The Purchaser's Designee has the right to sit on all
committees of the Board of Directors and Mr. Menkes was appointed to each
of the Audit Committee and the Compensation Committee of the Board of
Directors.
In the event any Purchaser's Designee is not elected, then, at
the request of TWCP L.P., the appointment of the Purchaser's Designee or
any other person designated by TWCP L.P. shall serve as a non-voting
observer (a "Non-Voting Observer") to the Board of Directors of the
Company. The Non-Voting Observer shall serve on the Board of Directors on
as nearly equivalent basis as is possible (other than the right to vote) as
would have been the case if the Purchaser's Designee had been elected to
the Board of Directors. The Purchaser's Designee shall have the right to
serve on the Board of Directors or as a Non-Voting Observer until the
purchasers and their affiliates beneficially own in the aggregate Preferred
Stock, Warrants and Common Stock less than the Ownership Threshold.
So long as the purchasers and their affiliates own in excess of
the Ownership Threshold, TWCP L.P. shall have the right to consult with and
advise management of the Company on significant business issues.
5. By-laws Amendment
-----------------
Pursuant to the Securities Purchase Agreement, the by-laws of the
Company were amended to require that the Board of Directors consist of
eight directors for so long as required by the Securities Purchase
Agreement and to provide that for so long as the Certificate of Designation
is in effect its provisions shall govern to the extent any provisions of
the by-laws are inconsistent with the Certificate of Designation.
6. Management Stockholders Agreements
----------------------------------
Pursuant to the Securities Purchase Agreement, the Limited
Partnerships and the Company entered into a Management Stockholders
Agreement with each of Mark K. Ruport, Steven M. Johnson, James Hale,
Thomas M. Rafferty, Mark R. Fey and Jeanne C. Logozzo (each a "Designated
Shareholder") which subject to certain exceptions provided therein,
provides for from February 9, 2000 until August 9, 2000, except for Mark
Ruport for whom such period shall extend from February 9, 2000 until
February 9, 2001, the agreement of the Designated Stockholders not to
transfer any shares of Common Stock (including upon exercise of options)
held by them without the consent of the Limited Partnerships. This
restriction on transfers will terminate automatically if the Designated
Stockholder's employment with the Company terminates.
7. Other Plans and Proposals
-------------------------
Except as described above or otherwise described in this Schedule
13D, neither the Filing Persons nor the Other Partnerships or the persons
listed on Schedule I currently have any plans or proposals which relate to
or would result in any transaction, event or action enumerated in the
paragraphs of Item 4 of the Form of Schedule 13D promulgated under the Act.
Each of the Filing Persons expects to evaluate on an ongoing
basis the Company's financial condition, business, operations and
prospects, the market price of the Common Stock, conditions in the
securities markets generally, general economic and industry conditions and
other factors. Accordingly, each Filing Person reserves the right to change
its plans and intentions at any time, as it deems appropriate. In
particular, any one or more of Filing Persons (and their respective
affiliates) may purchase additional shares of Common Stock, Warrants or
Preferred Stock or other securities of the Company or may sell or transfer
shares of Common Stock, Warrants or Preferred Stock (or any of the shares
of Common Stock into which such Preferred Stock is converted) beneficially
owned by them from time to time in public or private transactions and/or
may enter into privately negotiated derivative transactions with
institutional counterparties to hedge the market risk of some or all of
their positions in the shares of Common Stock, Preferred Stock or other
securities and/or may cause any of the Limited Partnerships to distribute
in kind to their respective partners or members, as the case may be, shares
of Common Stock or Preferred Stock or other securities owned by such
Limited Partnerships. To the knowledge of each Filing Person, each of the
persons listed on Schedule I hereto may make similar evaluations from time
to time or on an ongoing basis and have similar reservations.
ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER.
-------------------------------------
(a) Based on the information disclosed by the Company in the
Securities Purchase Agreement, as of February 8, 2000, there were 7,589,129
shares of Common Stock issued and outstanding.
As of February 23, 2000, TWCP L.P. beneficially owns 854,212
shares or 10.1% of Common Stock which represents the number of shares of
Common Stock into which the Preferred Stock and Warrants held are initially
convertible or exercisable and 1,379,401 shares or 15.4% of Common Stock
which represents the number of shares of Common Stock into which such
securities are convertible or exercisable on the eighth anniversary of the
issue date assuming that the Preferred Stock is not earlier converted or
redeemed.
As of February 23, 2000, TWCP LLC and TW Group may be deemed to
beneficially own 987,191 shares, or 11.5%, of Common Stock which represents
the number of shares of Common Stock into which the Preferred Stock and
Warrants held by the Limited Partnerships are initially convertible or
exercisable and 1,594,138 shares, or 17.4%, of Common Stock which
represents the number of shares of Common Stock into which such securities
held by the Limited Partnerships are convertible or exercisable on the
eighth anniversary of the issue date assuming that the Preferred Stock is
not earlier converted or redeemed. TWCP LLC and TW Group disclaim
beneficial ownership of the shares of Common Stock beneficially owned by
the Limited Partnerships to the extent of the interests in the Limited
Partnerships held by persons other than TWCP LLC and TW Group and their
affiliates.
None of the Filing Persons or, to the knowledge of the Filing
Persons, the Other Partnerships or the persons listed on Schedule I hereto
beneficially owns any shares of Common Stock other than as set forth
herein.
(b) Each Filing Person shares the power to vote or direct the
vote and to dispose or to direct the disposition of shares of Common Stock
beneficially owned by such Filing Person as indicated above as indicated in
responses on the cover pages hereto.
(c) Except as described in this Schedule 13D, no transactions in
the shares of Common Stock were effected by the Filing Persons, or, to
their knowledge, any of the Other Partnerships or the persons listed on
Schedule I hereto, during the past sixty days.
(d) Except for the Other Partnerships, no other person is known
by any Filing Person to have the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, any shares
of Common Stock beneficially owned by any Filing Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
-------------------------------------------------------------
The responses set forth in Items 3 and 4 of this Schedule 13D are
incorporated herein by this reference in their entirety.
The Company has agreed to reimburse the purchasers for their fees
and expenses incurred in connection with the transactions contemplated by
the Securities Purchase Agreement provided that such fees and expenses do
not exceed $175,000, in the aggregate.
Registration Rights Agreement
- -----------------------------
The Registration Rights Agreement, dated February 23, 2000, by
and among the Company, the Founders and Investors party thereto, the
Limited Partnerships and RKB (the "Registration Rights Agreement") is
attached hereto as Exhibit 6 and is incorporated in and made a part of this
Schedule 13D in its entirety by this reference. The Registration Rights
Agreement provides, subject to the limitations described therein, (i) the
Limited Partnerships and RKB on (A) three separate occasions with the right
to demand registration on Form S-1 or any similarly long-form registration
statement (each a "Long-Form Registration") under the Securities Act of
1933, as amended (the "Securities Act"), and (B) with an unlimited number
of demand registrations on Form S-2 or S-3 or any similar short-form
registration statement (a "Short-Form Registration") under the Securities
Act to effect a registration of shares of Common Stock and securities
convertible into, or exercisable or exchangeable for, shares of Common
Stock ("Common Stock Equivalents") held by the Limited Partnerships and
RKB, (ii) holders of Investors' Shares (as defined therein) with on (A) two
separate occasions the right to demand a Long-Form Registration and (B) an
unlimited number of Short-Form Registrations to effect a registration of
shares of Common Stock with respect to shares or Common Stock and Common
Stock Equivalents held by the Investors' Shares and (iii) all holders of
registrables shares the right to include shares of Common Stock and Common
Stock Equivalents then held by such holders of registrable shares (subject
to applicable cutbacks) in any other registration by the Company of its
equity securities under the Securities Act. The Company will pay certain
expenses in connection with such registration as provided in the
Registration Rights Agreement.
Other than as set forth in this Item 6 and Items 3, 4, and 5
above, none of the Filing Persons is a party to any contract, arrangement,
understanding or relationship with respect to any securities of the issuer,
and none of the securities as to which this Schedule 13D relates is pledged
or is otherwise subject to a contingency the occurrence of which would give
another person voting power or investment power over such securities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit 1 Joint Filing Agreement, dated as of February 29, 2000
Exhibit 2 Securities Purchase Agreement, dated as of February 9, 2000,
by and among the Company, the Limited Partnerships and RKB
Exhibit 3 Certificate of Designation of Series A Convertible Preferred
Stock
Exhibit 4 Management Stockholder Agreements for each of Jeanne C.
Logozzo, Steven M. Johnson, Marc R. Fey, James Hale, Thomas
M. Rafferty and Mark K. Ruport
Exhibit 5 Warrant Agreement, dated as of February 23, 2000, by and
among the Company, Limited Partnerships and RKB
Exhibit 6 Registration Rights Agreement, dated as of February 23,
2000, by and among the Company, the Founders and Investors
party thereto and the Limited Partnerships and RKB
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
February 29, 2000
THOMAS WEISEL PARTNERS GROUP LLC
By: /s/ David Baylor
------------------------------------------
Name: David Baylor
Title: Partner
THOMAS WEISEL CAPITAL PARTNERS LLC
By: Thomas Weisel Partners Group LLC, its
managing member
By: /s/ Marianne Winkler
------------------------------------------
Name: Marianne Winkler
Title: Chief Financial Officer
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its
general partner
By: Thomas Weisel Partners Group LLC, its
managing member
By: /s/ Marianne Winkler
------------------------------------------
Name: Marianne Winkler
Title: Chief Financial Officer
<PAGE>
EXHIBITS
Exhibit 1 Joint Filing Agreement, dated as of February 29, 2000
Exhibit 2 Securities Purchase Agreement, dated as of February 9, 2000,
by and among the Company, the Limited Partnerships and RKB
Exhibit 3 Certificate of Designation of Series A Convertible Preferred
Stock
Exhibit 4 Management Stockholder Agreements for each of Jeanne C.
Logozzo, Steven M. Johnson, Marc R. Fey, James Hale, Thomas
M. Rafferty and Mark K. Ruport
Exhibit 5 Warrant Agreement, dated as of February 23, 2000, by and
among the Company, Limited Partnerships and RKB
Exhibit 6 Registration Rights Agreement, dated as of February 23,
2000, by and among the Company, the Founders and Investors
party thereto and the Limited Partnerships and RKB
<PAGE>
SCHEDULE I
The name of each executive committee member of Thomas Weisel
Partners Group LLC is set forth below.
The business address of each person listed below is One
Montgomery Street, Suite 3700, San Francisco, California 94104 (except for
William Shutzer which is 390 Park Avenue, 17th Floor, New York, New York
10022).
Each person is a citizen of the United States of America. The
present principal occupation or employment of each of the listed persons is
set forth below.
Name Present Principal Occupation
- ---------------------------------------------------------------------------
Thomas W. Weisel Chief Executive Officer
- ---------------------------------------------------------------------------
Frank M. Dunlevy Co-Head of Investment Banking
- ---------------------------------------------------------------------------
Timothy J. Heekin Head of Trading
- ---------------------------------------------------------------------------
Derek Lemke-von Ammon Co-Head of Private Equity
- ---------------------------------------------------------------------------
Alan B. Menkes Co-Head of Private Equity
- ---------------------------------------------------------------------------
J. Sanford Miller Chief Administrative and Strategic Officer
- ---------------------------------------------------------------------------
William Shutzer Co-Head of Investment Banking
- ---------------------------------------------------------------------------
Mark Shafir Co-Head of Investment Banking and M&A
EXHIBIT 1
Joint Filing Agreement
The undersigned hereby agree that the Statement on Schedule 13D filed
herewith (and any amendments thereto), relating to the common stock, par
value $0.001 per share, of Optika Inc., is being filed jointly with the
Securities and Exchange Commission pursuant to Rule 13d-1(k)(1) under the
Securities Exchange Act of 1934, as amended, on behalf of each such person.
Dated: February 29, 2000
THOMAS WEISEL PARTNERS GROUP LLC
By: /s/ David Baylor
------------------------------------------
Name: David Baylor
Title: Partner
THOMAS WEISEL CAPITAL PARTNERS LLC
By: Thomas Weisel Partners Group LLC, its
managing member
By: /s/ Marianne Winkler
------------------------------------------
Name: Marianne Winkler
Title: Chief Financial Officer
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its
general partner
By: Thomas Weisel Partners Group LLC, its
managing member
By: /s/ Marianne Winkler
------------------------------------------
Name: Marianne Winkler
Title: Chief Financial Officer
EXHIBIT 2
EXECUTION COPY
--------------
SECURITIES PURCHASE AGREEMENT
by and among
OPTIKA INC.
THOMAS WEISEL CAPITAL PARTNERS L.P.
and
The Parties Listed On The Signature Page Hereto
As of
February 9, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS.........1
1.1. Issuance, Purchase and Sale.........................1
1.2. The Closing; Deliveries.............................2
1.3 Capitalized Terms...................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............2
2.1. Organization; Subsidiaries...........................2
2.2. Due Authorization....................................4
2.3. Capitalization.......................................5
2.4. SEC Reports..........................................6
2.5. Financial Statements.................................6
2.6. Absence of Certain Changes...........................7
2.7. Litigation...........................................8
2.8. Title to Properties; Insurance.......................8
2.9. Consents; No Violations..............................9
2.10. Holding Company Act and Investment Company Act......10
2.11. Taxes...............................................10
2.12. Employee Benefit Plans..............................11
2.13. Intellectual Property...............................13
2.14. Compliance with Laws................................16
2.15. Commitments.........................................17
2.16. Brokers or Finders..................................18
2.17. Related Party Transactions..........................18
2.18. Section 203 of the DGCL; Takeover Statute...........19
2.19. Proprietary Information of Third Parties............19
2.20. Disclosure..........................................20
2.21. Year 2000...........................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........21
3.1. Acquisition for Investment..........................21
3.2. Restricted Securities...............................21
3.3. No Brokers or Finders...............................21
3.4. Accredited Investor.................................21
3.5 Organization........................................21
3.6. Due Authorization...................................21
3.7. Consents; No Violations.............................22
3.8. Availability of Funds...............................22
3.9 Trading Price.......................................22
ARTICLE IV COVENANTS.................................................22
4.1. Conduct of Business by the Company Pending the
Closing.............................................22
4.2. No Solicitation.....................................25
4.3. Press Releases; Interim Public Filings..............25
4.4. Consents; Approvals.................................25
4.5. Listing.............................................26
4.6. Board Representation; VCOC..........................26
4.7. Committees..........................................28
4.8. Certificate of Designation..........................29
4.9. Cooperation.........................................29
4.10. Covenants to Provide Information....................29
4.11. Reserve Shares......................................30
4.12. Notice of Breach....................................30
4.13. Transfer Taxes......................................31
4.14. Indemnification.....................................31
4.15. Use of Proceeds.....................................31
4.16. Registration Rights Agreement.......................31
4.17. Future Issuances....................................31
ARTICLE V CONDITIONS................................................32
5.1. Conditions to Obligations of the Purchasers and
the Company.........................................32
5.2. Conditions to Obligations of the Purchasers.........32
5.3. Conditions to Obligations of the Company............33
ARTICLE VI TERMINATION...............................................34
6.1. Termination.........................................34
6.2. Effect of Termination...............................35
ARTICLE VII SURVIVAL; CERTAIN REMEDIES................................35
7.1. Survival............................................35
7.2. Indemnification.....................................35
ARTICLE VIII MISCELLANEOUS.............................................36
8.1. Defined Terms; Interpretations......................36
8.2. Fees and Expenses...................................43
8.3. Public Announcements................................43
8.4. Restrictive Legends.................................44
8.5. Further Assurances..................................44
8.6. Successors and Assigns..............................44
8.7. Entire Agreement....................................44
8.8. Notices.............................................45
8.9. Amendments..........................................46
8.10. Counterparts........................................46
8.11. Headings............................................46
8.12. Nouns and Pronouns..................................46
8.13. Governing Law.......................................47
8.14. Submission to Jurisdiction..........................47
8.15. Waiver of Jury Trial................................47
8.16. Severability........................................47
<PAGE>
Exhibit 1.2(b) Form of Warrant Agreement
Exhibit 2.2 Form of Certificate of Designation
Exhibit 5.1(iii) Consents
Exhibit 5.2(iv) Form of Management Stockholders Agreement
Exhibit 5.2(v) Form of Registration Rights Agreement
Exhibit 5.2(viii) Form of Opinion of The E*Law Group
<PAGE>
INDEX OF DEFINED TERMS
SECTION
Affiliate...............................................................8.1
Agreement..........................................................preamble
Board...................................................................8.1
Board of Directors......................................................8.1
Certificate of Designation..............................................2.2
Claim Notice.........................................................7.2(c)
Closing..............................................................1.2(a)
Closing Date.........................................................1.2(a)
Code....................................................................8.1
Commitments............................................................2.15
Common Stock.......................................................recitals
Company............................................................preamble
Company Intellectual Property...........................................8.1
Compensation and Benefit Plans..........................................8.1
Consents................................................................4.4
DGCL....................................................................8.1
Encumbrances.........................................................2.1(b)
Environmental Claim......................................................38
Environmental Laws......................................................8.1
Environmental Permits....................................................17
ERISA...................................................................8.1
ERISA Affiliate.........................................................8.1
Exchange Act............................................................8.1
Existing Rights Agreement..............................................4.16
GAAP....................................................................2.5
Governmental Entity.....................................................8.1
Hazardous Materials......................................................39
HSR Act.................................................................8.1
Intellectual Property...................................................8.1
IRS.....................................................................8.1
Knowledge...............................................................8.1
Latest Balance Sheet....................................................2.5
Laws....................................................................8.1
Leased Real Property....................................................8.1
Licenses............................................................2.14(a)
Litigation...........................................................2.7(a)
Losses..................................................................8.1
M&A Transaction.........................................................4.2
Material Adverse Effect.................................................8.1
Multi-Employer Plan.................................................2.12(c)
NASDAQ..................................................................8.1
Non-Listed Commitments.................................................2.15
Non-Voting Observer..................................................4.6(d)
Options.................................................................2.3
Owned Real Property.....................................................8.1
Ownership Threshold..................................................4.6(b)
PCBs.....................................................................39
Permitted Encumbrances..................................................8.1
Person..................................................................8.1
Preferred Stock....................................................recitals
Purchase Price..........................................................1.1
Purchaser..........................................................preamble
Purchaser Indemnified Person.........................................7.2(a)
Purchasers.........................................................preamble
Purchasers' Deductible...............................................7.2(a)
Purchasers' Designee.................................................4.6(b)
Purchasers' Designee Notice..........................................4.6(c)
Purchasers' Expenses....................................................8.2
Quarterly Financials................................................4.10(a)
Registration Rights Agreement.....................................5.2(a)(v)
Related Parties.........................................................8.1
Release.................................................................8.1
Return..................................................................8.1
SEC.....................................................................8.1
SEC Reports.............................................................2.4
Securities Act..........................................................8.1
Shareholders Agreements..........................................5.2(a)(iv)
Significant Shareholders................................................8.1
Subsidiaries.........................................................2.1(b)
Subsidiary...........................................................2.1(b)
Tax.....................................................................8.1
Taxes...................................................................8.1
Terminating Breach...................................................6.1(d)
Third Party.............................................................8.1
Transaction Documents...................................................8.1
TWCP...............................................................preamble
Warrant Agreement....................................................1.2(b)
Warrants...........................................................recitals
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of February 9,
2000 (this "Agreement"), by and among OPTIKA INC., a Delaware corporation
(the "Company"), Thomas Weisel Capital Partners, L.P., a Delaware limited
partnership ("TWCP") and the entities listed on the signature pages hereto
under the caption "Purchasers" (TWCP and each such entity, a "Purchaser"
and collectively with TWCP, the "Purchasers").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Company wishes to sell to the Purchasers, and
the Purchasers wish to purchase from the Company, (i) an aggregate of
731,851 shares of Series A Convertible Preferred Stock, par value $0.001
per share (the "Preferred Stock") of the Company, the terms of which are
set forth in the Certificate of Designation in the form of Exhibit 2.2
hereto and (ii) warrants (the "Warrants") to purchase an aggregate of
307,298 shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock"), the terms of which are set forth in the Warrant
Agreement attached in the form of Exhibit 1.2(b);
WHEREAS, the Purchasers and the Company desire to provide
for the purchase and sale of the Preferred Stock and Warrants to establish
certain rights and obligations in connection therewith, including the
execution and delivery by the Company and the Purchasers of the
Registration Rights Agreement in the form of Exhibit 5.2(v); and
WHEREAS, concurrently with the execution and delivery of
this Agreement, each of the Designated Stockholders are executing and
delivering a Shareholders Agreement with the Purchasers in the form of
Exhibit 5.2(iv).
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS
1.1. Issuance, Purchase and Sale. Upon the terms and conditions
set forth herein, at the Closing, the Company shall sell to the Purchasers,
and the Purchasers shall purchase from the Company, the Preferred Stock and
Warrants for an aggregate purchase price of $15,000,018.10, (the "Purchase
Price"). Each Purchaser shall, in exchange for the payment by such
Purchaser of the portion of the Purchase Price set forth opposite such
Purchaser's name on Schedule A receive the number of shares of Preferred
Stock and Warrants to purchase the number of shares of Common Stock set
forth opposite such Purchaser's name on Schedule A. The designations of the
Purchasers hereunder are several and not joint and no Purchaser shall have
any liability to any Person for the performance or non-performance by any
other Purchaser hereunder. The parties agree that the aggregate Purchase
Price shall be allocated for income tax purposes between the Preferred
Stock and the Warrants as set forth in Schedule B hereto.
1.2. The Closing; Deliveries. (a) The closing of the purchase and
sale of the Preferred Stock and Warrants hereunder (the "Closing") shall
take place at the offices of the Company at 9:00 a.m. on February 23, 2000
or such earlier date as may be specified by notice within two business days
of the Closing and mutually agreed to by the Company and the Purchasers, in
each case, subject to the satisfaction or waiver of the conditions to the
Closing set forth in Article V (other than those conditions that by their
nature are to be satisfied at such Closing, but subject to the satisfaction
or waiver of those conditions) (the date of the Closing, a "Closing Date").
(b) At the Closing, the Company shall deliver to the
Purchasers certificates representing the shares of Preferred Stock and
Warrants being purchased by the Purchasers at the Closing, each registered
in the name of the Purchaser or its nominee or designee in such amounts as
each Purchaser shall inform the Company prior to the Closing. Delivery of
such certificates shall be made against receipt by the Company of the
Purchase Price payable in connection with the Closing, which shall be paid
by wire transfer of immediately available funds to an account designated at
least three business days prior to the applicable Closing Date by the
Company. The Warrants shall be in the form attached as an exhibit to the
Warrant Agreement (the "Warrant Agreement"), attached in the form of
Exhibit 1.2(b)
1.3 Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to such terms in Section 8.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchasers, as of the date hereof and as of the Closing Date, as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in
good standing (and has paid all relevant franchise or analogous Taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary,
except where the failure to so qualify or be licensed do not and could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect. The minute books (containing the records of meetings of
stockholders, the Board of Directors, and any committees of the Board of
Directors), stock record books and certificate books of the Company contain
true, complete and accurate records in all material respects of all
corporate actions taken at any such meetings and other corporate governance
matters, the stock ownership of the Company and the transfer of the shares
of its capital stock since January 1, 1997. Complete and correct copies of
all of the foregoing have previously been made available to the Purchasers.
(b) Schedule 2.1(b) sets forth a complete and correct list
of each corporation, limited liability company, partnership, business
association or other Person with respect to which the Company has, directly
or indirectly, ownership of or rights with respect to securities or other
interests having the power to elect a majority of such Person's board of
directors or analogous or similar governing body, or otherwise having the
power to direct the management, business or policies of that corporation,
limited liability company, partnership, business association or other
Person (each, a "Subsidiary" and, collectively, the "Subsidiaries"). Except
as set forth on Schedule 2.1(b), the Company owns, either directly or
indirectly through one or more Subsidiaries, all of the capital stock or
other equity interests of the Subsidiaries free and clear of all liens,
charges, claims, security interests, restrictions, options, proxies, voting
trusts or other encumbrances ("Encumbrances"), other than transfer
restrictions imposed by applicable federal and state securities laws.
Except as set forth on Schedule 2.1(b) all of the issued and outstanding
shares of capital stock or other equity interests of each Subsidiary held
directly or indirectly by the Company have been duly authorized and are
validly issued, fully paid and nonassessable. No shares of capital stock or
other equity interests of any Subsidiary are entitled to preemptive rights.
Except as set forth on Schedule 2.1(b) or disclosed in the SEC Reports,
there are no outstanding subscription rights, options, warrants,
convertible or exchangeable securities or other rights of any character
whatsoever relating to issued or unissued capital stock or other equity
interests of any Subsidiary, or any Commitments of any character whatsoever
relating to issued or unissued capital stock or other equity interests of
any Subsidiary or pursuant to which the Company or any Subsidiary is or may
become bound to issue or grant additional shares of its capital stock or
other equity interests or related subscription rights, options, warrants,
convertible or exchangeable securities or other rights, or to grant
preemptive rights. Except as set forth on Schedule 2.1(b) or disclosed in
the SEC Reports, there are no voting trusts, stockholders agreements,
proxies or other Commitments or understandings to which any Subsidiary is a
party with respect to the voting or transfer of any capital stock or other
equity interest of any Subsidiary. Except for (i) the Subsidiaries, (ii)
assets held in benefit plans, (iii) corporate treasury transactions and
(iv) as set forth on Schedule 2.1(b), the Company does not own, directly or
indirectly, any interest in any corporation, limited liability company,
partnership, business association or other Person.
(c) Each Subsidiary is a corporation, limited liability
company, partnership, business association or other Person duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its
business as it is now being conducted. Except as set forth on Schedule
2.1(c), each Subsidiary is duly qualified and licensed to do business, and
is in good standing (and has paid all relevant franchise or analogous
taxes), in each jurisdiction where the character of its assets owned or
held under lease or the nature of the business conducted by it makes such
qualification necessary, except where the failure of any such Subsidiary to
so qualify or be licensed individually or in the aggregate do not and could
not reasonably be expected to have a Material Adverse Effect. The minute
books or other records (containing the records of meetings of stockholders
or other holders of other equity interests, the board of directors or other
similar governing body, and any committees thereof), the stock ownership or
analogous records and the certificate books of each of the Subsidiaries
contain in all material respects true, complete and accurate records of all
actions taken at any such meetings and other governance matters, the stock
or other equity ownership of each of such Subsidiaries and the transfer of
the shares of its capital stock or other equity interest since January 1,
1997. Complete and correct copies of all of the foregoing have previously
been made available to the Purchasers.
2.2. Due Authorization. The Company has all right, corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and each of the other Transaction Documents
to which it is a party, the issuance and sale of the Preferred Stock and
the Warrants by the Company and the compliance by the Company with each of
the provisions of this Agreement and each of the other Transaction
Documents to which it is a party (including the reservation and issuance of
the shares of Common Stock on any conversion of the Preferred Stock or any
exercise of the Warrants (collectively, the "Common Shares") and the
consummation by the Company of the transactions contemplated hereby and
thereby) (a) are within the corporate power and authority of the Company
and (b) have been duly authorized by all requisite corporate proceedings on
the part of the Board of Directors and, if applicable, to the stockholders
of the Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by
the Company will be, duly and validly executed and delivered by the
Company, and this Agreement constitutes, and each of such other Transaction
Documents (other than the Preferred Shares) when executed and delivered by
the Company will constitute, a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability against the Company may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to the rights of creditors generally and by legal and
equitable limitations on the enforceability of specific remedies
(regardless of whether enforcement is considered in a proceeding in equity
or at law). The shares of Preferred Stock and all Common Shares issuable
upon conversion of the Preferred Stock and exercise of the Warrants have
been validly reserved for issuance, and upon payment of the Purchase Price
in the case of the Preferred Stock and Warrants and upon conversion of the
Preferred Stock or the exchange of the Warrants in the case of the Common
Shares, such shares of Preferred Stock, Warrants and Common Shares, as the
case may be, will be duly and validly issued and outstanding, fully paid,
and nonassessable and issued free of preemptive rights. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications, limitations and restrictions of the
Preferred Stock will be set forth in the Certificate of Designation of the
Preferred Stock (the "Certificate of Designation"), the form of which is
attached as Exhibit 2.2.
2.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, par value $0.001 per
share, and (ii) 2,000,000 shares of preferred stock, par value $0.001 per
share. As of the date hereof, (a) 7,589,129 shares of Common Stock were
issued and outstanding, (b) options ("Options") to purchase an aggregate of
2,270,437 shares of Common Stock under the Company's 1994 Employee Stock
Option Plan (the "Company Option Plan") were outstanding, 2,270,437 shares
of Common Stock were reserved for issuance upon the exercise of outstanding
Options and 57,545 shares were reserved for future grant not authorized
prior to the date of this Agreement under the Company Option Plan, (c)
warrants ("Settlement Warrants") to purchase an aggregate of 9,738 shares
of Common Stock upon exercise were outstanding, (d) 583 shares of Common
Stock ("Restricted Stock") were reserved for issuance under the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan"), (e) no shares of
Common Stock were held by the Company in its treasury or by any of the
Subsidiaries of the Company and (f) except for the Preferred Stock
designated by the Certificate of Designation, no shares of preferred stock
of the Company have been issued or are outstanding. The Company has not
adopted any shareholders rights plan with respect to its Common Stock. The
Company has no outstanding bonds, debentures, notes or other obligations or
securities entitling the holders thereof to vote (or which are convertible
or exercisable for securities having the right to vote) with the
stockholders of the Company on any matter. A complete and correct list of
each outstanding Option and Settlement Warrants, the holders and the
exercise price thereof is set forth on Schedule 2.3, and, as to each such
Option, whether the same is vested. Since December 31, 1999, the Company
(i) has not issued any shares of Common Stock other than (x) upon exercise
of Options or Warrants, and (y) the issuance of at least 85% of fair market
value of 39,336 shares of Restricted Stock under the Company's Stock
Purchase Plan, (ii) has granted at fair market value Options to purchase an
aggregate of 210,500 shares of Common Stock under the Company Option Plan
and (iii) has not split, combined or reclassified any of its shares of
capital stock. All of the issued and outstanding shares of Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth on
Schedule 2.3 or pursuant to the Transaction Documents, there are no
outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever
relating to issued or unissued capital stock of the Company, or any
Commitments of any character whatsoever relating to issued or unissued
capital stock of the Company or pursuant to which the Company or any of the
Subsidiaries is or may become bound to issue or grant additional shares of
its capital stock or related subscription rights, options, warrants,
convertible or exchangeable securities or other rights, or to grant
preemptive rights. Except as set forth on Schedule 2.3, (i) the Company has
not agreed to register any securities under the Securities Act or under any
state securities law or granted registration rights to any Person or entity
and (ii) there are no voting trusts, stockholders agreements, proxies or
other Commitments or understandings in effect to which the Company is a
party or of which it has Knowledge with respect to the voting or transfer
of any of the shares of Common Stock. To the extent that any options,
warrants or any of the other rights described above are outstanding,
neither the issuance and sale of the Preferred Stock and the Warrants, nor
any issuance of Common Shares on conversion or exercise thereof will result
in an adjustment of the exercise or conversion price or number of shares
issuable upon the exercise or conversion of any such options, warrants or
other rights.
2.4. SEC Reports. The Company has timely filed all registration
statements, proxy or information statements, reports and other documents
required to be filed by it with the SEC under the Exchange Act from and
after July 25, 1996 (collectively, the "SEC Reports"). Each SEC Report was
as of their respective dates in compliance as to form in all material
respects with the applicable requirements of the Securities Act and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2.5. Financial Statements. Each of the consolidated balance
sheets of the Company included or incorporated by reference into the SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its consolidated
Subsidiaries as of its date, and each of the consolidated statements of
earnings and cash flows of the Company included or incorporated by
references into the SEC Reports (including any related schedules and or
notes) fairly presents the results of operations, earnings or cash flows,
as the case may be, of the Company and its consolidated Subsidiaries for
the respective periods set forth therein, in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied for
the periods involved, except as noted therein and subject, as to interim
statements, to normal year-end audit adjustments, none of which has had or
would be reasonably expected to have a Material Adverse Effect. Except as
set forth on Schedule 2.5 or disclosed in the SEC Reports, neither the
Company nor any Subsidiary has any liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise, whether known or
unknown, whether due or to become due and regardless of when asserted),
except (i) liabilities and obligations in the respective amounts reflected
or reserved against in the Company's consolidated balance sheet as of
December 31, 1999 (the "Latest Balance Sheet"), (ii) liabilities and
obligations incurred in the ordinary course of business since December 31,
1999 which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect or (iii) under Commitments in
accordance with the terms and conditions thereof which are not required by
GAAP to be reflected on the Latest Balance Sheet except Commitments that
are required to be disclosed pursuant to Section 2.15 and are not so
disclosed.
2.6. Absence of Certain Changes. Except as set forth on Schedule
2.6, as disclosed in the SEC Reports, or pursuant to the transactions
contemplated by this Agreement and the other Transaction Documents, since
September 30, 1999: (i) the business of the Company and the Subsidiaries
taken as a whole has been conducted in the ordinary course of business
consistent with past practice, (ii) the Company and its Subsidiaries have
not (a) suffered any change, event or development or series of changes,
events or developments which individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect, (b)
suffered any damage, destruction or casualty loss to its physical
properties (whether or not covered by insurance) which individually or in
the aggregate has resulted or could reasonably be expected to result in a
Material Adverse Effect or (c) been the subject of any material Litigation
or threatened or commenced investigation by a Governmental Entity and (iii)
there has not been (a) any declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of the
Company or its Subsidiaries (other than wholly-owned Subsidiaries) or any
repurchase, redemption or any other acquisition by the Company or its
Subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or its Subsidiaries, (b)
any material change in accounting principles, practices or methods, (c) any
entry into or amendment of any employment agreement with, or any increase
in the rate or terms (including, without limitation, any acceleration of
the right to receive payment) of compensation payable or to become payable
by the Company or any of its Subsidiaries to, their respective directors,
officers or employees, except increases in the ordinary course of business
in accordance with the past practice of the Company, (d) any increase in
the rate or terms (including, without limitation, any acceleration of the
right to receive payment) of any bonus, insurance, pension or other
employee benefit plan or arrangement covering any such directors, officers
or employees, except increases in the ordinary course of business in
accordance with the past practice of the Company, or (e) any material
revaluation by the Company or any of its Subsidiaries of any of their
respective assets, including, without limitation, write-downs of inventory
or write-offs of accounts receivable except in the ordinary course of
business in accordance with the Company's past practices prior to December
31, 1999.
2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as
disclosed in the SEC Reports, there is no material claim, action, suit,
investigation or proceeding ("Litigation") pending or, to the Knowledge of
the Company, threatened against the Company or any of the Subsidiaries or
involving any of their respective properties or assets by or before any
court, arbitrator or other Governmental Entity.
(b) Except as set forth on Schedule 2.7(b) or as disclosed
in the SEC Reports, neither the Company nor any of the Subsidiaries is in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, and neither the Company nor any of
the Subsidiaries is a party or subject to any order, judgment or decree of
any court, arbitrator or other Governmental Entity.
2.8. Title to Properties; Insurance. (a) Except as set forth on
Schedule 2.8(a), the Company and the Subsidiaries have good and valid title
to, or, in the case of property leased by them, a valid and subsisting
leasehold interest in, their respective material properties and assets,
free of all Encumbrances except for Permitted Encumbrances.
(b) The SEC Reports list all Owned Real Property. With
respect to the Owned Real Property, (i) the Company and its Subsidiaries
have good and marketable title in fee simple to the Owned Real Property,
free and clear of all Encumbrances except for Permitted Encumbrances, (ii)
there are no outstanding options or rights of first refusal in favor of any
other Person to purchase the Owned Real Property or any portion thereof or
interest therein, and (iii) there are no leases, subleases, licenses,
options, rights, concessions or other Commitments affecting any portion of
the Owned Real Property.
(c) The SEC Reports list all material Leased Real Property.
With respect to the Leased Real Property, the Company and the Subsidiaries
have good and valid leasehold estates in the Leased Real Property, free and
clear of all Encumbrances except for Permitted Encumbrances and
Encumbrances set forth on Schedule 2.8(a). Except as set forth on Schedule
2.8(c), (A) each lease or sublease relating to the Leased Real Property is
legal, valid, binding and enforceable in accordance with its terms against
the Company and to the Company's Knowledge, against the other parties
thereto, and in full force and effect and (B) the execution and delivery of
this Agreement and the consummation of the transactions contemplated by
this Agreement will not cause a breach or require any third party consent
or notification under any such lease or sublease.
(d) Schedule 2.8(d) sets forth a complete and correct list
of all insurance coverage carried by the Company and the Subsidiaries,
including for each policy the type and scope of coverage, the carrier and
the amount of coverage, including directors' and officers' liability
insurance. All of the material assets of the Company and the Subsidiaries
and all aspects of the Company's and the Subsidiaries' businesses that are
of insurable character are covered by insurance with reputable insurers
against risks of liability, casualty and fire and other losses and
liabilities customarily obtained by other similarly situated public
companies to cover comparable businesses and assets in amounts, scope and
coverage (and with deductibles) which are consistent with prudent industry
practice by other similarly situated public companies. Neither the Company
nor any of the Subsidiaries is in default in a material respect with
respect to any of its obligations under any insurance policy maintained by
it. All such policies are in full force and effect and no premiums with
respect thereto are past due and owed. Except as set forth on Schedule
2.8(d), there are no claims by the Company or any of the Subsidiaries under
any of such policies to which any insurance company is denying liability or
defending under a reservation of rights or similar clause. Except as set
forth on Schedule 2.8(d), neither the Company nor any of the Subsidiaries
has received notice of any pending or threatened termination of any of such
policies or any premium increases for the current policy period with
respect to any of such policies, and the consummation of the transactions
contemplated by this Agreement or any of the other Transaction Documents
will not result in any such termination or premium increase. The Company
maintains a directors' and officers' insurance policy with both the
National Union Fire Insurance Company and the Federal Insurance Company
(complete and correct copies of which have previously been delivered to the
Purchasers), which will both, upon the election or appointment of either
the Preferred Stock Designee or the Purchaser's Designee, include such
designee as a covered person.
2.9. Consents; No Violations. Except as set forth on Schedule
2.9, neither the execution, delivery or performance by the Company of this
Agreement or any of the other Transaction Documents to which it is a party
nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, or result in a breach or a violation of, any
provision of the certificate of incorporation or by-laws of the Company or
any Subsidiary; (b) constitute, with or without notice or the passage of
time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i)
any Law or (ii) any Commitment to which the Company or any of the
Subsidiaries is a party or pursuant to which any of them or any of their
assets or properties is subject, except, with respect to the matters set
forth in this clause (b), for breaches, violations, defaults, Encumbrances,
or rights of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration, which, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect or adversely affect the ability of the Company to consummate
the transactions contemplated by this Agreement or any other Transaction
Document to which it is a party; or (c) require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of the Company or
any of the Subsidiaries except for filings required under the Exchange Act
and, in the case of Restructuring Rights Agreement, the Securities Act and
state "blue sky" laws.
2.10. Holding Company Act and Investment Company Act. Neither the
Company nor any of the Subsidiaries is: (i) a "public utility company" or a
"holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended, or (ii) a "public utility," as defined in the Federal Power
Act, as amended, or (iii) an "investment company" or an "affiliated person"
thereof or an "affiliated person" of any such "affiliated person," as such
terms are defined in the Investment Company Act of 1940, as amended.
2.11. Taxes. (a) Except as disclosed in Schedule 2.11(a), the
Company and each of the Subsidiaries has timely filed all Returns required
by Law to have been filed by it and has paid all Taxes required to be paid
by it including, without limitation, any Tax levied upon any of its
properties, assets, income or franchises. All such Returns were complete
and correct in all material respects. All amounts required to be collected
or withheld by the Company and each of the Subsidiaries has been collected
or withheld and any such amounts that are required to be remitted to any
taxing authority have been duly remitted. The accruals and reserves for
Taxes on the Latest Balance Sheet are complete and adequate in all material
respects to cover any liability of the Company and each of its Subsidiaries
for Taxes for periods through December 31, 1999. The accruals and reserves
for deferred tax liabilities on the Latest Balance Sheet are adequate to
cover any such liability in accordance with GAAP.
(b) Schedule 2.11(b) contains a list of states, territories
and jurisdictions (whether foreign or domestic) in which the Company or any
of the Subsidiaries currently files an income, franchise, sales or use
Return. Except as set forth on Schedule 2.11(b), (i) neither the IRS nor
any other taxing authority has asserted in writing any claim involving a
material amount of Taxes, or to the Knowledge of the Company, is
threatening to assert any claims involving a material amount of Taxes,
against the Company or any of the Subsidiaries, (ii) neither the Company
nor any of the Subsidiaries has been a member of a consolidated, combined
or unitary group for federal or state or foreign income Tax purposes that
included any member other than the current members of the consolidated
federal income tax group of which the Company is the common parent, (iii)
there are no Returns with respect to which an audit or examination is in
progress or with respect to which a written notification of intent to audit
or examine has been received by the Company or any of the Subsidiaries from
the IRS or any other taxing authority that relate to Taxes for which the
Company or any of the Subsidiaries could be liable, (iv) neither the
Company nor any of the Subsidiaries is or has been a party to any Tax
sharing agreement (except for agreements with Subsidiaries providing for
the sharing of liabilities on a pro rata basis) that will remain in effect
and under which the Company or any such Subsidiary could have any material
liability for Taxes, (v) there are no liens for Taxes upon any assets of
the Company or any of the Subsidiaries (other than liens for Taxes not yet
due and payable), except for liens which individually or in the aggregate
do not and could not reasonably be expected to have a Material Adverse
Effect, (vi) neither the Company nor any of the Subsidiaries has agreed or
is required to include in income during the current year or any future
taxable period any material adjustment pursuant to Section 481 of the Code
(or similar provisions of foreign, state or local law) by reason of a
change in accounting method or otherwise, and the IRS has not proposed any
such adjustment, and (vii) complete copies of all income Tax Returns filed
by the Company and each of the Subsidiaries for taxable periods commencing
on or after January 1, 1994 have been provided to, or made available to,
the Purchasers.
2.12. Employee Benefit Plans. (a) Schedule 2.12 sets forth a
complete and correct list of (i) all of the Compensation and Benefit Plans
that are intended to qualify with the applicable requirements of Article
401(a) of the Code and (ii) all employment, severance and change of control
agreements with employees, former employees, officers, former officers,
directors, former directors or the beneficiaries of any of the foregoing or
pursuant to which the Company or any Subsidiary has or may have any
liability in excess of $100,000. Except with respect to any Multi-Employer
Plan, the Company has heretofore delivered or made available to the
Purchasers true and complete copies of all Compensation and Benefit Plans
and any amendments thereto (or if a Compensation and Benefit Plan is not in
written form, a written description thereof), any related trust or other
funding agreement or vehicle, the most recent reports or summaries required
under ERISA or the Code and, with respect to each Compensation and Benefit
Plan intended to qualify under Article 401 of the Code, the most recent
determination letter received from the IRS.
(b) Except where the failure to do so could not individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect, the Company and each Subsidiary have performed all obligations
required to be performed by them under each Compensation and Benefit Plan
and neither the Company nor any Subsidiary is in default under or in
violation of, any Compensation and Benefit Plan. Each Compensation and
Benefit Plan has in all material respects been established, operated,
maintained and administered, as the case may be, in accordance with its
terms and is in compliance in all material respects with all applicable
Laws, statutes, orders, rules and regulations, including, but not limited
to, ERISA and the Code.
(c) At no time during the seven (7) year period immediately
preceding the date of this Agreement has the Company, or any ERISA
Affiliate contributed to or been required to contribute to, or incurred any
withdrawal liabilities (within the meaning of Section 4201 of ERISA) to any
"Multi-Employer Plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA (a "Multi-Employer Plan").
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate presently sponsors, maintains or contributes to, nor is the
Company, any Subsidiary or any ERISA Affiliate required to sponsor,
maintain or contribute to, nor has the Company, any Subsidiary or any ERISA
Affiliate (other than where the Company, such Subsidiary or such ERISA
Affiliate has no continuing material obligation or liability) ever
sponsored, maintained, contributed to or been required to contribute to,
any Compensation and Benefit Plan which is an "employee pension benefit
plan" within the meaning of Article 3(2) of ERISA and which is subject to
Title IV of ERISA.
(e) Neither the Company, any Subsidiary nor any ERISA
Affiliate (i) maintains or contributes to any Compensation and Benefit Plan
which provides, or has any liability to provide, life insurance, medical or
dental benefits to any employee upon his retirement or termination of
employment, except as may be required by Article 4980B of the Code or as
would not reasonably be expected to have individually or in the aggregate a
Material Adverse Effect; or (ii) has ever represented to, promised or
contracted with (whether in oral or written form) any employee (either
individually or to employees as a group) that such employee would be
provided with life insurance, medical or dental benefits upon retirement or
termination of employment, except to the extent required by Article 4980B
of the Code or as would not reasonably be expected to have individually or
in the aggregate a Material Adverse Effect.
(f) There are no pending, or to the Knowledge of the
Company, threatened claims by or on behalf of any Compensation and Benefit
Plan by any employee or beneficiary covered under any such Compensation and
Benefit Plan, or otherwise involving any such Compensation and Benefit
Plan, that individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect.
(g) Except as otherwise set forth on Schedule 2.12(g), there
is no Commitment covering any employee or former employee of the Company or
any Subsidiary that, individually or in the aggregate, would be reasonably
likely to give rise to the payment of any amount that would result in a
material loss of tax deductions pursuant to the terms of Article 162(m) of
the Code.
(h) Except where the failure to do so could not individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect, the Company and each Subsidiary (i) is in compliance with all
applicable federal, state and local laws, rules and regulations (domestic
and foreign) respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, in each case, with respect to
employees; (ii) has withheld all amounts required by Law or by Commitment
to be withheld from the wages, salaries and other payments to employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; and (iv) is not liable for
any payment to any trust or other fund or to any Governmental Entity with
respect to unemployment compensation benefits, social security or other
benefits for employees.
(i) No work stoppage or labor strike against the Company or
any Subsidiary by employees is pending, or to the knowledge of the Company,
threatened. Except for such matters that could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, neither
the Company nor any Subsidiary (i) is involved in, or to the knowledge of
the Company, threatened with any labor dispute, grievance, or Litigation
relating to labor matters involving any employees, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints or (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act.
(j) Except as set forth in Schedule 2.12(j) the execution,
delivery and performance by the Company of the transactions contemplated by
this Agreement and the other Transaction Documents to which it is a party
will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Compensation and Benefit
Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee. No payment or benefit which will or may be
made by the Company, any Subsidiary, the Purchasers or any of their
respective Affiliates in connection with the transactions contemplated by
this Agreement or any of the other Transaction Documents with respect to
any employee will be characterized as an "excess parachute payment" within
the meaning of Article 280G(b)(1) of the Code.
2.13. Intellectual Property. (a) Each item of Company
Intellectual Property which is a patent, patent application, trademark,
trademark application, service mark, service mark application, logo, trade
name, domain name, corporate name, copyright registration, copyright
application, mask work registration, mask work application, license,
sublicense, is set forth on Schedule 2.13(a).
(b) Except as disclosed on Schedule 2.13(b): (i) the Company
or a Subsidiary owns or has the right to use pursuant to a valid license,
sub-license or other agreement all Company Intellectual Property, except
where the absence of any thereof could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect and the
consummation of the transactions contemplated hereby will not alter or
impair any such rights;
(ii) to the Company's Knowledge, neither the Company
nor any of the Subsidiaries has interfered with, infringed upon or
misappropriated any Intellectual Property rights of third parties, except
for interferences, infringements and misappropriations which could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any
written claim, demand or notice alleging any such interference,
infringement or misappropriation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party);
(iii) to the Company's Knowledge, no third party has
interfered with, infringed upon or misappropriated any Intellectual
Property rights of the Company or any Subsidiary, except for interferences,
infringements and misappropriations which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect except
as set forth on Schedule 2.13(b):
(iv) each item of Company Intellectual Property will be
owned or available for use by the Company on identical terms and conditions
immediately subsequent to the Closing hereunder;
(v) all registered patents, trademarks, service marks
and copyrights listed on Schedule 2.13(a) are valid and subsisting and in
full force and effect and are not subject to any taxes or other fees except
for periodic filing and maintenance fees;
(vi) the Company is not aware of any notice, claim or
assertion that any item of Company Intellectual Property is invalid nor is
the Company aware of any facts that would cause a reasonable person to
conclude that any item of Company Intellectual Property is invalid;
(vii) Company Intellectual Property is all the
Intellectual Property that is necessary for the Company's business as
currently conducted; and
(viii) the Company has taken commercially reasonable
action to maintain and protect each item of Company Intellectual Property.
(c) With respect to each item of Company Intellectual
Property, except as set forth in Schedule 2.13(c):
(i) the Company possess all right, title and interest
in and to the item, free and clear of any Encumbrance, license or other
restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, is threatened which challenges the legality,
validity, enforceability, use or ownership of the item;
(iv) the Company has never agreed to indemnify any
person for or against any interference, infringement, misappropriation or
other conflict with respect to the item;
(v) each license, sublicense, agreement or permission
disclosed on Schedule 2.13(a) is legal, valid, binding, enforceable and in
full force and effect and will continue to be legal, valid, binding,
enforceable against the Company, and, to the Company's Knowledge, the other
party thereto and in full force and effect on identical terms following the
Closing;
(vi) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or acceleration
thereunder;
(vii) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) has repudiated in writing any
provision thereof;
(viii) with respect to any sublicense disclosed on
Schedule 2.13(a), the representations and warranties set forth in
subsections (v) through (vii) above are true and correct with respect to
the underlying license;
(ix) with respect to each license, sublicense,
agreement or permission disclosed on Schedule 2.13(a), the underlying item
of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(x) with respect to each license, sublicense, agreement
or permission disclosed on Schedule 2.13(a), no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or to
the Company's Knowledge is threatened which challenges the legality,
validity or enforceability of the underlying item of Intellectual Property;
and
(xi) with respect to each license, sublicense,
agreement or permission disclosed on Schedule 2.13(a), the Company has not
granted any sublicense or similar right with respect to the license,
sublicense, agreement or permission.
(d) The continued operation of the Company's business as
presently conducted will not interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any Intellectual Property rights of
third parties.
(e) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere with the
use such employee's best efforts to promote the interest of the Company or
that would conflict with the Company's business as presently conducted or
the Company Intellectual Property.
(f) Neither the execution nor delivery of this Agreement nor
the carrying on of the Company's business as currently conducted by the
employees of the Company, nor the conduct of the Company's business as
presently conducted, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions of provisions of, or constitute
a default under, any contract, covenant or instrument under which any or
such employees is now obligated.
(g) The Company does not and will not need, in order to
conduct the Company's business as presently conducted, to utilize any
inventions of any of its employees, former employees (or persons it
currently intends to hire) made while not employed by the Company and the
rights to which have not been fully assigned to the Company.
(h) The Company has obtained valid and effective assignments
from all of its employees, former employees, independent contractors, and
former independent contractors (collectively defined herein as "Inventors")
of all of such Inventors' rights in any Intellectual Property developed by
such Inventors while employed by or under contract with the Company.
(i) For each item of Company Intellectual Property which is
an application, including but not limited to patent applications, trademark
applications, service mark applications, copyright applications, or mask
work applications, the Company has the right to require the applicant to
transfer ownership to the Company of the application and of the
registration once it issues.
(j) The Company has taken reasonable precautions to protect
the secrecy, confidentiality, and value of its trade secrets, and has
entered into confidential information/non-disclosure agreements with each
of its officers, employees, and independent contractors.
2.14. Compliance with Laws. (a) Except as set forth on Schedule
2.14(a) or as disclosed in the SEC Reports, the Company and the
Subsidiaries are in compliance in all material respects with all Laws, and
since September 30, 1999 neither the Company nor any Subsidiary has
received any notice of any alleged violation of Law applicable to it that
could reasonably be expected to have a Material Adverse Effect. The Company
and the Subsidiaries have all material licenses, franchise permits,
consents, registrations, certificates, and other governmental or regulatory
permits, authorizations or approvals required for the operation of the
business as presently conducted and for the ownership, lease or operation
of the Company's and its Subsidiaries' properties except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect
(collectively, "Licenses"). Except as set forth on Schedule 2.14(a), the
Company and the Subsidiaries have all Licenses, and all of such Licenses
are valid and in full force and effect, and the Company and the
Subsidiaries have duly performed and are in compliance in all material
respects with all of their obligations under such Licenses. No event has
occurred with respect to any of such Licenses that allows, or after notice
or lapse of time or both would allow, the suspension, limitation,
revocation, non-renewal or termination thereof that, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect, and no terminations of any License or proceedings to
suspend, limit, revoke or terminate any License have been threatened. The
Company has made available for inspection by the Purchasers copies of all
material correspondence between the Company or any of the Subsidiaries, on
the one hand, and the SEC on the other hand.
(b) Neither the Company nor any Subsidiary has offered or
agreed to offer anything of value to any government official, political
party or candidate for governmental or political office (or any person that
the Company knows, or has reason to know, will offer anything of value to
any governmental official, political party or candidate for governmental or
political office), such that the Company or any of the Subsidiaries have
violated the Foreign Corrupt Practices Act of 1977, as amended.
(c) Except as set forth on Schedule 2.14(c) and except as
would not, individually or in the aggregate, have a Material Adverse
Effect:
(i) the Company and each of its Subsidiaries is in
compliance with applicable Environmental Laws;
(ii) the Company and each of its Subsidiaries has
obtained or has applied for all applicable environmental, health and safety
permits, licenses, variances, approvals and authorizations required under
Environmental Laws (collectively, the "Environmental Permits") necessary
for the conduct of its operations;
(iii) there is no Environmental Claim pending or, to
the knowledge of the Company, threatened (A) against the Company or any of
its Subsidiaries, (B) against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by the
Company or any of its Subsidiaries, or (C) against any real property which
the Company or any of its Subsidiaries owns, leases or operates; and
(iv) to the Knowledge of the Company, there have been
no Releases of any Hazardous Materials that would be reasonably likely to
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries.
2.15. Commitments. Schedule 2.15 sets forth a complete and
correct list of each written and, if material, oral contract, agreement,
understanding, arrangement and commitment of any nature whatsoever,
including all amendments thereof and supplements thereto ("Commitments") of
the following types to which the Company or any Subsidiary is a party or by
or to which the Company or any Subsidiary or any of their properties may be
bound or subject as of the date hereof: (i) Commitments containing
covenants purporting to limit the freedom of the Company or any Subsidiary
to compete in any line of business in any geographic area or to hire any
individual or group of individuals, (ii) Commitments or related series of
Commitments relating to capital expenditures in excess of $3,000,000, (iii)
(x) Commitments or related series of Commitments relating to the lease or
sublease of or sale or purchase of personal property involving any annual
expense or price in excess of $3,000,000, and (y) each material lease or
sublease of real property or Commitments relating to the sale or purchase
of material real property, (iv) Commitments relating to indentures,
mortgages, promissory notes, loan agreements, guarantees, letters of credit
or other agreements or instruments of the Company or any Subsidiary or
Commitments for or relating to the borrowing or the lending of money by or
to the Company or any Subsidiary in excess of $3,000,000 or providing for
any right of first refusal or the creation of any Encumbrance upon any of
the assets or properties of the Company or any Subsidiary, (v) Commitments
relating to the acquisition or disposition of any operating business or the
capital stock of any Person that has not been consummated or that has been
consummated but contains representations, warranties, covenants,
guarantees, indemnities or other obligations that remain in effect, (vi)
Commitments relating to any material Litigation, (vii) Commitments under
which the Company or any Subsidiary agrees to indemnify any Person, (viii)
Commitments in respect of any joint venture, partnership or other similar
arrangement, (ix) Commitments with any Governmental Entity; (x) other
Commitments or related series of Commitments which involve payments of over
$3,000,000 or which are otherwise material (excluding license and
maintenance contracts entered with customers of the Company entered into in
the ordinary course of business consistent with past practice (such
excluded Commitments, "Non-Listed Commitments"). All such listed
Commitments and all Non-Listed Commitments are valid and binding
obligations of the Company and each Subsidiary, as the case may be, and, to
the Knowledge of the Company, are the valid and binding obligation of each
other party thereto except where the failure to be so valid and binding
individually or in the aggregate do not and could not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary nor, to the Knowledge of the Company, any other party is in
material violation of or in material default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under, any listed Commitment or
Non-Listed Commitment, except for default which individually and in the
aggregate do not and could not be reasonably expected to have a Material
Adverse Effect.
2.16. Brokers or Finders. No agent, broker, investment banker or
other Person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Company or any of the
Subsidiaries, or any Affiliate of any of the foregoing.
2.17. Related Party Transactions. Except as disclosed in the SEC
Reports and Schedule 2.17, there are no transactions and Commitments
between or involving the Company or any of the Subsidiaries, on the one
hand, and any Related Party, on the other hand, engaged in or entered into
since December 31, 1998 (including those initiated prior to such date and
continued or continuing following such date).
2.18. Section 203 of the DGCL; Takeover Statute. The Board of
Directors shall have adopted a resolution to the effect that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
2.19. Proprietary Information of Third Parties. Except as set
forth on Schedule 2.19, and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) to the Company's Knowledge, no Third Party has claimed
that any Person employed by or affiliated with the Company has (a) violated
or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such Third Party, (b)
disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such Third Party or
(c) interfered or may be interfering in the employment relationship between
such Third Party and any of its present or former employees. No Third Party
has requested information from the Company which suggests that such a claim
might be contemplated;
(ii) to the Company's Knowledge, no Person employed by or
affiliated with the Company has employed or proposes to employ any trade
secret or any information or documentation proprietary to any former
employer, and to the best of the Company's Knowledge, no Person employed by
or affiliated with the Company has violated any confidential relationship
which such Person may have had with any Third Party, in connection with the
development, manufacture or sale of any product or proposed product or the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and
the Company has no reason to believe there will be any such employment or
violation; and
(iii) none of the execution or delivery of this Agreement,
or the carrying on of the business of the Company as officers, employees or
agents by any officer, director or key employee of the Company, or the
conduct or proposed conduct of the business of the Company, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which
any such Person is obligated.
2.20. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor
any certificate furnished to the Purchasers by or on behalf of the Company
in connection with the transactions contemplated hereby and thereby,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The financial information disclosed by the Company
to the Purchasers with respect to the financial condition, results of
operation and cash flows of the Company for the year ending December 31,
1999 attached as Exhibit 2.20 hereto have been reasonably prepared in
accordance with GAAP consistently applied for the period involved, and
reflect the best currently available estimates and judgment of the
Company's management as to the financial performance of the Company and the
Subsidiaries for such period and to be reflected in the Company's SEC
Reports for such period and any public announcements and conferences with
analysts with respect thereto.
2.21. Year 2000. (a) The Company has conducted an inventory and
assessment of all software, computers, network equipment, technical
infrastructure, production equipment and other equipment and systems that
are material to the operation of its business and that rely on, utilize or
perform date or time processing ("Systems") to insure that the Systems are
Year 2000 Compliant.
(b) Any failure of any of the Company's System to be Year
2000 Compliant has not had and is not reasonably expected to have a
Material Adverse Effect.
(c) In addition to upgrading its own Systems, the Company
has contacted certain significant suppliers to determine whether their
Systems are Year 2000 Compliant. The Company has not received any
information which would indicate that the Systems of its suppliers are not
Year 2000 Compliant to the extent the same could reasonably be expected to
result in any significant disruption to the Company's sources of supplies.
(d) "Year 2000 Compliant" means a System has at all times:
(i) consistently and accurately handled and processed date and time
information and data values before, during and after January 1, 2000,
including but not limited to accepting date input, providing date output,
and performing calculations on or utilizing dates or portions of dates;
(ii) function accurately and in accordance with its specifications without
interruption, abnormal endings, degradation, change in operation or other
impact, or disruption of other systems, resulting from processing date or
time data with values, before, during and after January 1, 2000; (iii)
respond to and process two-digit date input in a way that resolves any
ambiguity as to century; and (iv) store and provide output of date
information in ways that are unambiguous as to century.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers, severally and not jointly, hereby represent
and warrant to the Company, as of the date hereof and as of the Closing
Date, as follows:
3.1. Acquisition for Investment. Each Purchaser is acquiring the
Preferred Stock and the Warrants for its own account, for investment and
not with a view to the distribution thereof within the meaning of the
Securities Act.
3.2. Restricted Securities. Each Purchaser understands that (i)
the Preferred Stock, the Warrants and any Common Shares issuable upon
conversion or exercise thereof will not be registered under the Securities
Act or any state securities Laws by reason of their issuance by the Company
in a transaction exempt from the registration requirements thereof and (ii)
the shares of the Preferred Stock, the Warrants and any Common Shares
issuable upon conversion or exercise thereof may not be sold unless such
disposition is registered under the Securities Act and applicable state
securities Laws or is exempt from registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment banker
or other Person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Purchasers.
3.4. Accredited Investor. Each Purchaser is an "accredited
investor" (as defined in Rule 501(a) under the Securities Act).
3.5 Organization. Each Purchaser is a limited partnership duly
organized, validly existing and in good standing under the Laws of the
State of Delaware (except for RKB Capital, L.P., which is organized,
validly existing and in good standing under the Laws of the State of
Minnesota) and has the requisite power and authority to carry on its
business as it is now being conducted.
3.6. Due Authorization. Each Purchaser has all right, power and
authority to enter into this Agreement and the other Transaction Documents
to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each Purchaser of this
Agreement and the other Transaction Documents to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby
(a) are within its power and authority and (b) have been duly authorized by
all necessary action on the part of such entity. This Agreement
constitutes, and each of the other Transaction Documents to which it is a
party will constitute upon execution and delivery by each Purchaser, a
valid and binding agreement of such entity enforceable against such entity
in accordance with their respective terms, except as enforceability against
each Purchaser may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in effect
relating to the rights of creditors generally and by legal and equitable
limitations on the enforceability of specific remedies (regardless of
whether enforcement is considered in a proceeding in equity or at law).
3.7. Consents; No Violations. Neither the execution, delivery or
performance by each Purchaser of this Agreement and the other Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby will (a) conflict with, or result in a breach or a violation of,
any provision of the organizational documents of such entity; (b)
constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance, or give rise to any
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law, or (ii) any
Commitment of such entity, or to which such entity or any of its assets or
properties is subject, except, with respect to the matters set forth in
clause (ii), for breaches, violations, defaults, Encumbrances, or rights of
termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, which, individually or in the
aggregate, could not have a Material Adverse Effect on the ability of such
entity to consummate the transactions contemplated hereby; or (c) require
any consent, approval or authorization of, notification to, filing with, or
exemption or waiver by, any Governmental Entity or any other Person on the
part of such entity.
3.8. Availability of Funds. The Purchasers have or will have
available at the Closing, sufficient funds to pay the Purchase Price for
the Preferred Stock and the Warrants.
3.9 Trading Price. The Purchasers acknowledge that no
representations and warranties made by the Company in Article II herein
(including, without limitation, any reference to a Material Adverse Effect)
shall be deemed a representation as to the current or prospective trading
price of the shares of the Company's Common Stock.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. (a)
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, unless the Purchasers otherwise agree in writing,
the Company shall, and shall cause each of the Subsidiaries to, (i) conduct
its business only in the ordinary course and consistent with past practice;
(ii) use reasonable best efforts to preserve and maintain its assets and
properties and its relationships with its customers, suppliers,
advertisers, distributors, agents, officers and employees and other Persons
with which it has significant business relationships; (iii) use reasonable
best efforts to maintain all of the material assets it owns or uses in the
ordinary course of business consistent with past practice; (iv) maintain
insurance in full force and effect substantially comparable in amount,
scope and coverage to that in effect on the date of this Agreement; (v) use
reasonable best efforts to preserve the goodwill and ongoing operations of
its business; (vi) maintain its books and records in the usual, regular and
ordinary manner, on a basis consistent with past practice; (vii) perform
and comply in all material respects with its Commitments; and (viii) comply
in all material respects with applicable Laws. Except as expressly
contemplated by this Agreement or as set forth on Schedule 4.1, between the
date of this Agreement and the Closing, the Company shall not, and shall
cause each of the Subsidiaries not to, do any of the following without the
prior written consent of the Purchasers:
(A) create any Encumbrance other than (i) Permitted Encumbrances
and (ii) Encumbrances securing indebtedness permitted by clause (D) of this
Section 4.1(a);
(B) acquire or dispose of (by merger, consolidation, or
acquisition of stock or assets) any Person, business, business line or any
material amount of assets;
(C) (i) except as provided in Schedule 4.1(a)(C) hereto, incur
any additional indebtedness other than indebtedness incurred in the
ordinary course of business under the Company's existing revolving credit
agreement and pursuant to capital leases not exceeding $750,000 in the
aggregate, or (ii) make any loans, advances or capital contributions to, or
investments in, any Person other than (x) to a Subsidiary or (y) advances
in the ordinary course of business to Persons that are not Related Parties
not exceeding $750,000 to any one such Person;
(D) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by GAAP;
(E) (i) except as provided in Schedule 4.1(a)(E) hereto, grant or
amend any stock-related or performance awards; (ii) except with respect to
agreements which are terminable at will by the Company without any material
penalty to the Company, enter into or amend any legally binding employment,
severance, consulting or salary continuation agreements with any officers,
directors or employees or grant any increases in compensation or benefits
to employees other than increases to officers and employees in the ordinary
course of business consistent with the past practice of the Company; (iii)
adopt, amend or terminate any employee benefit plan or arrangement;
(F) except as set forth in Schedule 2.17, enter into any
transaction or Commitment with any Related Party;
(G) allow the lapse of any of the Company's or any Subsidiary's
rights of ownership or use of any material Intellectual Property right
except in the ordinary course of business consistent with past practice;
(H) (i) repurchase, redeem or otherwise acquire or exchange any
share of Common Stock or other equity interests except for repurchases of
unvested shares pursuant to the terms of the Company's Option Plan, (ii)
except as provided in Schedule 4.1(a)(E) hereto, issue or sell any
additional shares of the capital stock of, or other equity interests in,
the Company or any Subsidiary, or securities convertible into or
exchangeable for such shares or other equity interests, or issue or grant
any subscription rights, options, warrants or other rights of any character
relating to shares of such capital stock, such other equity interests or
such securities, except pursuant to the Transaction Documents and except
for issuances of Common Stock pursuant to the exercise of Options or (iii)
declare, set aside, make or pay any dividend, or make any distribution, in
respect of any shares of capital stock of the Company;
(I) amend the Company's certificate of incorporation or by-laws,
except with respect to the filing of the Certificate of Designation or for
other non-material changes, or amend any Subsidiary's charter or by-laws or
other organizational documents in any respect materially adverse to the
Company;
(K) make any material change in the Company's or any Subsidiary's
Tax accounting methods, any material new election with respect to Taxes or
any material modification or revocation of any existing election with
respect to Taxes or settle or otherwise dispose of any material Tax audit,
dispute, or other Tax proceeding, except in the ordinary course of
business;
(L) effect any stock split, reverse stock split, stock dividend,
subdivision, reclassification or similar transaction, or otherwise change
its capitalization as it exists on the date hereof;
(M) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or the capital stock of any of its
Subsidiaries;
(N) sell, lease, assign, transfer or otherwise dispose of (by
merger or otherwise) any of its property, business or assets (including, without
limitation, receivables, leasehold interests or Intellectual Property and
including any sale leaseback transaction) except for (i) the sale of inventory
in the ordinary course of business, and (ii) other asset sales for fair value in
the ordinary course of business provided that the proceeds of such other asset
sales do not exceed $3,000,000 in the aggregate prior to the Closing;
(O) make any advance, loan, extension of credit or capital
contribution to, or purchase or acquire (by merger or otherwise) any stock,
bonds, notes, debentures or other securities of, or any assets constituting
a business unit of, or make any other investment in, any person, firm or
entity, except (a) extensions of trade credit and endorsements of
negotiable instruments and other negotiable documents in the ordinary
course of business, (b) investments in cash and cash equivalents, (c)
payroll and travel advances in the ordinary course of business and, (d)
investments in wholly owned Subsidiaries; or
(P) agree or publicly announce any intention to take any of
the actions restricted by this Section 4.1.
4.2. No Solicitation. From the date of this Agreement until the
earlier of the termination of this Agreement or the Closing, other than in
connection with the transactions contemplated hereby, neither the Company
nor any of the Subsidiaries shall solicit, propose or facilitate (including
by way of providing information regarding the Company or any of the
Subsidiaries or their respective businesses to any Person), directly or
indirectly, any inquiries, discussions, offers or proposals for, continue
or enter into negotiations looking toward, or enter into or consummate any
Commitment or understanding in connection with any offer or proposal
regarding, any issuance of capital stock or securities convertible into
capital stock, except as permitted under Section 4.1. In addition, the
Company agrees not to enter into, consummate or in any way commit to any
purchase or acquisition of all or any material portion of the Company and
the Subsidiaries taken as a whole, the business or assets of the Company
and the Subsidiaries taken as a whole, or any capital stock of or equity
interests in (whether newly issued or currently outstanding) the Company or
any of the Subsidiaries, and (b) any merger, business combination or
recapitalization involving the Company or any of the material Subsidiaries
or their respective businesses (each such transaction an "M&A
Transaction"). The Company agrees to promptly inform the Purchasers of the
identity of any Person making any M&A Transaction and the nature and terms
of any such M&A Transaction and to keep the Purchasers promptly and fully
informed as to the status thereof whether made before or after the date of
this Agreement.
4.3. Press Releases; Interim Public Filings. Subject to Section
8.3, the Company shall deliver to the Purchasers complete and correct
copies of all press releases and public filings relating to the Transaction
Documents, the transactions contemplated thereby and Company corporate
matters made between the date hereof and the Closing, and shall give the
Purchasers the reasonable opportunity to review and comment on such
releases and filings, in each case prior to release in the form in which it
will be issued.
4.4. Consents; Approvals. The Company shall use its reasonable
best efforts, not requiring the expenditure of a material sum or the making
of some other material accommodation, to obtain all consents, waivers,
exemptions, approvals, authorizations or orders (collectively, "Consents")
(including, without limitation (i) Consents required to avoid any breach,
violation, default, encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration set forth on Schedule 2.9 or required to be set forth thereon,
(ii) all Consents pursuant to the Company's or any Subsidiary's financing
documents, including, without limitation, all indentures and credit
agreements of the Company or any Subsidiary, and (iii) all United States
and foreign governmental and regulatory rulings and approvals), and the
Company shall make all filings (including, without limitation, all filings
with United States and foreign governmental or regulatory agencies),
required or desirable in connection with the authorization, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby; provided,
however, no payment (other than filing fees related to the matters
contemplated hereby) or other accommodation shall be made by the Company in
connection with obtaining any of the foregoing without the Purchasers'
prior written consent. The Purchasers shall cooperate with the Company in
obtaining such Consents. The Company also shall use its reasonable best
efforts, not requiring the expenditure of a material sum or the making of
some other material accommodation, to obtain all necessary state securities
laws or blue sky permits and approvals required to carry out the
transactions contemplated hereby and shall furnish all information as may
be reasonably requested in connection with any such action.
4.5. Listing. The Company shall use its best efforts to
continue to have its Common Stock quoted on the NASDAQ national market system or
other comparable national exchange prior to the Closing, and for so long as any
shares of Preferred Stock, Warrants or any Common Shares issued upon conversion
or exercise of the Preferred Stock and Warrants are outstanding. Prior to the
Closing, the Company shall prepare and submit to the NASDAQ a listing
application covering the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants and shall obtain approval for the
listing of such shares, subject to official notice of issuance.
4.6. Board Representation; VCOC. (a) Section 4 of the Certificate
of Designation provides that the holders of Preferred Stock and Warrants
shall be entitled to elect one director (the "Preferred Stock Designee") to
the Board of Directors of the Company subject to the terms set forth
therein. For so long as the Purchasers and their Affiliates, as holders of
the Preferred Stock and Warrants maintain ownership at the Ownership
Threshold, shall have the right under this Agreement and the Certificate of
Designation to designate the Preferred Stock Designee, TWCP shall have the
right, separately enforceable by it without further action required or
permitted by any of the Purchasers or their Affiliates, to designate such
Preferred Stock Designee.
(b) In the event the Certificate of Designation is no longer
in effect, and so long as the Purchasers and their Affiliates beneficially
own in the aggregate Preferred Stock, Warrants and Common Shares issuable
upon conversion or exercise thereof representing (and assuming conversion
and exercise of all such Preferred Stock and Warrants) greater than 15% of
the Common Shares (assuming such conversion and exercise) acquired by the
Purchasers in the aggregate at the Closing (and adjusting for stock splits,
stock combinations and like transactions) (such ownership threshold
referred to as the "Ownership Threshold"), TWCP shall have the right to
designate hereunder, at all times and from time to time, one director of
the Company (individuals designated pursuant to this paragraph, the
"Purchasers' Designee"). In the event of a vacancy caused by the
disqualification, removal, resignation or other cessation of service of any
Purchasers' Designee from the Board, the Board shall elect as a director
(to serve until the term of such Purchaser Designee would have expired) a
new Purchasers' Designee who has been designated by TWCP in an additional
Purchasers' Designee Notice that has been provided to the Company at least
seven (7) days prior the date of a regular meeting of the Board. TWCP shall
nominate each Purchasers' Designee pursuant to an additional Purchasers'
Designee Notice in advance of each meeting of shareholders at which such
Purchasers' Designee is to be elected.
(c) TWCP shall provide notice to the Company (the
"Purchasers' Designee Notice") as required by Section 4.6(a) above for each
Purchasers' Designee, which notice shall contain the following information:
(i) the name of the Person it has designated to become director, and (ii)
all information required by Regulation 14A and Schedule 14A under the
Exchange Act with respect to each such Purchasers' Designee. Subject to
Section 4.6(c) below, the Purchasers' Designee may be any person designated
by TWCP, including persons who are officers, directors or employees of the
Purchasers or their Affiliates.
(d) The Company agrees to include the Purchasers' Designee
to be added to or retained on the Board pursuant to this Agreement in the
slate of nominees recommended by the Board to the Company's shareholders
for election as director and shall use its reasonable efforts to cause the
election or reelection of a Purchasers' Designee to the Board at each
meeting of shareholders at which the Purchasers' Designee is up for
election, including soliciting proxies in favor of the election of such
Persons, it being understood that efforts consistent with those used for
other members of the slate recommended by the Board shall be deemed
reasonable. In the event that, notwithstanding the provisions of this
Section 4.6(d), the Purchasers' Designee is not elected to the Board then,
at the written request of TWCP made within 30 days after the date of the
shareholder meeting at which the Purchasers' Designee was not elected, the
Company shall cause, at the request of TWCP, the appointment of the
Purchaser's Designee or any other Person designated by TWCP, as a
non-voting observer (a "Non-Voting Observer") to the Board of the Company;
it being understood that TWCP may from time to time change the designation
of such Non-Voting Observer. The Company shall afford to any Purchasers'
Designee who serves as a Non-Voting Observer, on as nearly equivalent basis
as is possible (other than the right to vote) as would have been the case
if the Purchasers' Designee had been elected to the Board, the opportunity
to meaningfully participate in, express views with respect to and have
influence on the deliberations of the Board, including through receipt, at
the same time as the Board receives the same, of all information and
material as is distributed to the Board.
(e) So long as the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares exceeding the Ownership Threshold, without the prior written consent
of TWCP, the Board of Directors shall not amend the provisions of the
by-laws of the Company, as amended in accordance with Section 5.2(x)
specifying that the size of the entire Board shall consist of eight
members.
(f) So long as the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares exceeding the Ownership Threshold, TWCP shall have the right to
consult with and advise management of the Company on significant business
issues, including finances and accounts of the Company and management's
proposed annual operating plans, and meet with management at the Company's
facilities at mutually agreeable times for such consultation and advice,
including to review progress in achieving said plans subject to the
execution of a mutually acceptable non-disclosure agreement. The Company
agrees to consider the advice given and any proposals made by TWCP,
provided the Company should be under no obligation to accept or follow such
advice.
(g) The rights set forth in this Section 4.6 are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying TWCP's interests in the Company as venture capital investments
for purposes of the Department of Labor's "plan assets" regulations, and in
the event such rights are not satisfactory for such purpose as to TWCP, the
Company and the Purchasers shall reasonably cooperate in good faith to
agree upon mutually satisfactory management rights which satisfy such
regulations.
(h) Unless otherwise agreed by the Company, the Purchasers
shall cause the Purchasers' Designee then serving on the Board or as a
Non-Voting Observer to resign from the Board or as a Non-Voting Observer
immediately at any time after the Purchasers and their Affiliates
beneficially own in the aggregate Preferred Stock, Warrants and Common
Shares less than the Ownership Threshold.
4.7. Committees. (a) The Preferred Stock Designee or Purchaser's
Designee, as the case may be, shall be granted representation (as of the
Closing Date) on all Board committees, including the audit and compensation
committees. In the event that a Non-Voting Observer is serving on the Board
as the representative for the Purchasers, such Non-Voting Observer shall be
afforded, on as nearly equivalent basis as is possible (other than the
right to vote) the opportunity to meaningfully participate in and express
views with respect to the deliberations of the committees.
(b) The Board will not establish an executive committee
authorized to exercise the power of the Board generally unless the
Purchasers are granted representation on such committee proportional to its
representation on the Board, nor will the Board establish or employ
committees (unless the Purchasers are granted proportional representation
thereon) as a means designed to circumvent or having the effect of
circumventing the rights of the Purchasers under this Agreement to
representation on the Board.
4.8. Certificate of Designation. The Company shall, prior to or
concurrently with the Closing, cause the Certificate of Designation to be
filed with the Secretary of State of the State of Delaware as set forth in
the form of the Certificate of Designation attached hereto as Exhibit 2.2.
4.9. Cooperation. Each of the Purchasers and the Company agrees
to use its reasonable best efforts to take, or cause to be taken, as
promptly as practicable all such further actions as shall be necessary to
make effective and consummate the transactions contemplated by this
Agreement.
4.10. Covenants to Provide Information. The Company covenants and
agrees with each Purchaser that so long as the Purchasers and their
Affiliates own in the aggregate Preferred Shares, Warrants and Common
Shares in excess of the Ownership Threshold, the Company shall deliver to
each Purchaser:
(a) Within 45 days after the end of each quarterly fiscal
period, (i) unaudited balance sheets and an income statement as of the end of
such period, together with statements of retained earnings and cash flow for
such period ("Quarterly Financials"), together with such analysis and
comparisons to budget as are routinely provided to the Board.
(b) Within 90 days after the end of each fiscal year, commencing
with the first fiscal year ending after the Closing, (i) audited balance
sheets and an income statement as of the end of such fiscal year, together
with statements of retained earnings and cash flow for such fiscal year,
all in reasonable detail and certified by a recognized national firm of
independent accountants selected by the Board of Directors of the Company
as presenting fairly the financial position and results of operations of
the Company and as having been prepared in accordance with GAAP
consistently applied, including their opinion thereon in the form included
in the Company's Annual Report on Form 10-K, and (ii) the accounting firm's
management letter.
(c) Promptly upon becoming available, (i) copies of all financial
statements, reports, material press releases, notices, proxy statements and
other documents sent by the Company to its shareholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Company with any securities regulatory agency or any securities exchange
and (ii) any other financial or other information available to management
of the Company as the Purchasers shall have reasonably requested on a
timely basis.
(d) If for any period the Company shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Company,
then, in respect of such period, the financial statements and information
delivered pursuant to the foregoing paragraphs (a), (b) and (c) of this
Section 4.10 shall be the consolidated and consolidating financial
statements of the Company and all such consolidated subsidiaries.
(e) At least 30 days prior to the beginning of each fiscal year,
an annual budget for the Company for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets), and
promptly upon preparation thereof any other significant budgets prepared by
the Company and any revisions of such annual budget.
(f) Promptly (but in any event within ten business days) after
the discovery or receipt of notice of (i) any default under any material
agreement to which the Company and/or any of its Subsidiaries is a party,
which default could reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries, (ii) any other event
which could reasonably be expected to have a Material Adverse Effect on the
condition (financial or otherwise), results of operations, or business of
the Company or any of its Subsidiaries (including, without limitation, the
filing of any material litigation against the Company or any of its
Subsidiaries a statement certified by a senior executive officer of the
Company specifying the nature and period of existence thereof and what
actions the Company has taken and proposes to take with respect thereto.
(g) With reasonable promptness, such other information and
financial data concerning the Company as the Purchasers may reasonably
request.
4.11. Reserve Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Stock and the exercise of the Warrants, the number of shares of
Common Stock from time to time issuable upon conversion of all shares of
the Preferred Stock and exercise of the Warrants at the time outstanding.
All Common Shares issuable upon conversion of the Preferred Stock and the
exercise of the Warrants shall be duly authorized and, when issued upon
such conversion or exercise, shall be validly issued, fully paid and
nonassessable.
4.12. Notice of Breach. From the date hereof through the Closing,
as promptly as practicable, and in any event not later than two business
days after senior management of the Company becomes aware thereof, the
Company shall provide the Purchasers with written notice of (a) any
representation or warranty of the Company contained in this Agreement or
any other Transaction Document being untrue or inaccurate in any material
respect at any time from the date hereof to the Closing, or (b) any failure
of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by the Company under this
Agreement or any other Transaction Document.
4.13. Transfer Taxes. The Company shall be responsible for
liability with respect to any transfer, stamp or similar Taxes which may be
payable in connection with the execution, delivery and performance of this
Agreement including, without limitation, any such Taxes with respect to the
issuance of the Preferred Stock, the Warrants or the Common Shares.
4.14. Indemnification. So long as a Preferred Designee is a
director, except for amendments or modifications required by Law, the
Company shall not amend or modify any rights to indemnification now
existing in favor of the present and former directors, officers or
employees of the Company and its Subsidiaries provided in the certificate
of incorporation and by-laws of the Company or any Subsidiary in a manner
adverse to any such director, officer or employee, and the Company shall
maintain officers' and directors' liability insurance carrying the
directors of the Company with coverage no less favorable than presently in
effect.
4.15. Use of Proceeds. The proceeds from the sale of the
Preferred Stock and Warrants shall be used for general corporate purposes
as shall be determined by the Board of Directors.
4.16. Registration Rights Agreement. The Company will use its
reasonable best efforts prior to Closing to amend and restate the
Registration Rights Agreement and the amended and restated registration
rights agreement, dated May 6, 1996, as amended (the "Existing Rights
Agreement"), so that all of the registrable securities under both
agreements are covered by a single agreement, the terms of which are
approved by the mutual consent of the Company and the requisite holders of
registrable securities under each of the Registration Rights Agreement and
the Existing Rights Agreement.
4.17. Future Issuances. The Company agrees that it shall be a
condition of its issuance of any additional Common Stock (or securities
convertible into or exercisable or exchangeable for Common Stock) pursuant
to any employee benefit plan (other than the issuance of additional shares
of Common Stock upon exercise of options outstanding as of the date hereof)
that the person receiving such securities, if after receipt thereof such
person beneficially owns in excess of 1% of the outstanding shares, to
agree not to effect any public sale or distribution of equity securities of
the Company, including any public sale pursuant to Rule 144 under the
Securities Act, or any securities convertible into or exchangeable or
exercisable for such securities, during the period commencing thirty days
prior to and ending 90 days after the effective date of any underwritten
demand registration or any underwritten piggyback registration under the
Registration Rights Agreement.
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the Company.
The respective obligations of the Purchasers and the Company to consummate
the transactions contemplated hereunder shall be subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(i) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which prohibits the
consummation of the transactions to be consummated at the Closing;
(ii) Any waiting period (and any extension thereof) under
the HSR Act applicable to this Agreement and the transactions
contemplated hereby shall have expired or been terminated; and
(iii) Any material required filings or Consents set forth on
Schedule 5.1(iii), if any, shall have been made or obtained.
5.2. Conditions to Obligations of the Purchasers. (a) The
obligation of the Purchasers to consummate the transactions contemplated
hereunder shall be subject to the satisfaction or waiver by the Purchasers
at or prior to the Closing of each of the following conditions:
(i) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations
and warranties to any materiality and Material Adverse Effect
qualifications) as of the Closing (except to the extent such
representations and warranties are made as of a particular date, in
which case such representations and warranties shall have been true
and correct in all material respects as of such date), except for
failures to be true and correct which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect,
(ii) The Company in all material respects shall have
performed, satisfied and complied with each of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing;
(iii) The Company shall have delivered to the Purchasers an
officer's certificate certifying as to the Company's compliance with
the conditions set forth in clauses (i) and (ii) of this Section 5.2;
(iv) The Designated Shareholders and the Company shall have
entered into Management Stockholders Agreements in the form of Exhibit
5.2(iv) (the "Shareholders Agreements"), with each of Mark K. Ruport,
Steven M. Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and
Jeanne C. Logozzo and the Shareholders Agreements shall be in full
force and effect;
(v) The Company shall have executed and delivered a
Registration Rights Agreement in the form of Exhibit 5.2(v) (the
"Registration Rights Agreement"), and the Registration Rights
Agreement shall be in full force and effect;
(vi) The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware and shall
be in full force and effect;
(vii) The Shares initially issuable upon conversion or
exercise, as the case may be, of the Preferred Stock and Warrants
shall have been duly authorized and reserved for issuance and such
Shares shall have been listed on the NASDAQ, subject to official
notice of issuance;
(viii) The Purchaser shall have received at the Closing an
opinion of the E*Law Group, outside counsel to the Company, in the
form of Exhibit 5.2(viii);
(ix) There shall not have occurred since September 30, 1999
any change or development or series of changes or developments
(including without limitation as a result of any change in the Law)
which has resulted in or could reasonably be expected to result
individually or in the aggregate in a Material Adverse Effect; and
(x) The Board of Directors shall have amended the by-laws of
the Company to provide that (i) the Board of Directors consists of
eight directors, one of whom shall be the Preferred Designee and (ii)
the provisions of the Certificate of Designation, to the extent
inconsistent with the by-laws, shall be expressly controlling.
5.3. Conditions to Obligations of the Company. The obligation of
the Company to consummate the transactions contemplated hereunder shall be
subject to the satisfaction or waiver at or prior to the Closing of each of
the following conditions:
(a) Each of the representations and warranties of the
Purchasers contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations and
warranties to any materiality and/or Material Adverse Effect
qualifications) as of the Closing (except to the extent such
representations and warranties are made as of a particular date, in which
case such representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to be true
and correct which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the ability of the Purchasers
to fulfill their obligations hereunder;
(b) The Purchasers in all material respects shall have
performed, satisfied and complied with each of its covenants and agreements
set forth in this Agreement to be performed, satisfied and complied with
prior to or at the Closing, disregarding for this purpose all references in
such covenants and agreements to any materiality or similar qualifications;
(c) The Purchasers shall have delivered to the Company an
officer's certificate certifying as to the Purchasers' compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.3.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Closing, upon written notice of such termination by the
terminating party to the other party setting forth the basis for such
termination:
(a) by mutual written consent of the Company and the
Purchasers at any time prior to the Closing; or
(b) by either the Purchasers or the Company if the Closing
shall not have been consummated by March 15, 2000 (provided that the right
to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date); or
(c) by either the Purchasers or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order, decree or
ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or
(d) by the Purchaser or the Company, (i) if any
representation or warranty of the other set forth in this Agreement shall
be untrue in any material respect when made to the extent that such first
party did not have actual knowledge of such breach as of the date of this
Agreement, or (ii) upon a breach in any material respect of any covenant or
agreement on the part of the other set forth in this Agreement, in each
case which would constitute a failure of the condition to Closing of the
first party (either (i) or (ii) above being a "Terminating Breach");
provided, that, if such Terminating Breach is curable within ten business
days after notice of a party's intent to terminate this Agreement, through
the exercise of reasonable efforts, and for so long as the other party
continues to exercise such reasonable efforts during such ten business day
cure period, the termination shall be effective immediately following
notice and such ten business day cure period and only if the Terminating
Breach is not cured as of such time.
6.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
provided that Sections 7.2, 8.3, 8.8, 8.13, 8.14 and 8.15 and this Section
6.2 shall survive any termination of this Agreement.
ARTICLE VII
SURVIVAL; CERTAIN REMEDIES
7.1. Survival. If the Closing shall occur, the representations
and warranties of the parties hereto contained in this Agreement or in any
of the other Transaction Documents shall expire on the tenth business day
following the date the Company files with the SEC its Form 10-K for the
fiscal year ended December 31, 2000, except that the representations and
warranties set forth in Sections 2.11, 2.12 and 2.14(c), shall survive
until the expiration of the applicable statute of limitations (including
any extensions thereof). After the expiration of such periods, any claim by
a party hereto based upon any such representation or warranty shall be of
no further force and effect, except to the extent a party has asserted a
claim in accordance with this Article VII for breach of any such
representation or warranty prior to the expiration of such period, in which
event any representation or warranty to which such claim relates shall
survive with respect to such claim until such claim is resolved as provided
in this Article VII. The covenants and agreements of the parties hereto
contained in this Agreement or in any of the other Transaction Documents
shall survive the Closing until performed in accordance with their terms.
7.2. Indemnification. (a) The Company shall indemnify, defend and
hold harmless the Purchasers, their Affiliates, and their respective
officers, directors, partners, members, employees, agents, representatives,
successors and assigns (each a "Purchasers' Indemnified Person") from and
against all Losses incurred or suffered by a Purchaser Indemnified Person
arising from (i) the breach of any of the representations or warranties
made by the Company in this Agreement or any other Transaction Document
(without giving effect to any qualification as to materiality or Material
Adverse Effect contained in such representations and warranties), (ii) the
breach of any covenant or agreement made by the Company in this Agreement
or any other Transaction Document or (iii) any claims, investigations or
litigation brought by any Person or Governmental Entity related to the
transactions contemplated by this Agreement. Notwithstanding anything to
the contrary in this Agreement, no indemnification payment by the Company
to the Purchasers pursuant to this Section 7.2(a) with respect to any
Losses otherwise payable hereunder pursuant to clause (i) above as a result
of any one or more breaches of the representations made by the Company in
this Agreement or any other Transaction Document shall be payable (x) until
such time or the cumulative Losses directly or indirectly incurred or
suffered by the Purchasers shall exceed $1,000,000 (the "Purchasers'
Deductible") and then, (y) only to the extent the Purchasers' Losses exceed
such Purchasers' Deductible and (z) up to a maximum of $15,000,000.
(b) A party seeking indemnification under this Section 7.2
shall, promptly upon becoming aware of the facts indicating that a claim
for indemnification may be warranted, give to the party from whom
indemnification is being sought a notice of claim relating to such Loss (a
"Claim Notice"). Each Claim Notice shall specify the nature of the claim,
the applicable provision(s) of this Agreement or other instrument under
which the claim for indemnity arises, and, if possible, the amount or the
estimated amount thereof. No failure or delay in giving a Claim Notice (so
long as the same is given prior to expiration of the representation or
warranty upon which the claim is based) and no failure to include any
specific information relating to the claim (such as the amount or estimated
amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation
of the party from whom indemnification is sought.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. The following terms, as
used herein, shall have the following meanings:
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
"Certificate of Designation" shall have the meaning ascribed
thereto in Section 2.2.
"Closing" shall have the meaning ascribed thereto in Section
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in
Section 1.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commitments" shall have the meaning ascribed thereto in
Section 2.15.
"Common Shares" shall have the meaning ascribed thereto in
Section 2.2.
"Common Stock" shall have the meaning ascribed thereto in
the recitals.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Affiliates" shall have the meaning ascribed thereto
in Section 4.2.
"Company Intellectual Property" shall mean all Intellectual
Property which is used or is proposed to be used by the Company in its
business as currently conducted.
"Compensation and Benefit Plans" shall mean all material
bonus, vacation, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option plans, all employment or
severance contracts, all medical, dental, disability, health and life
insurance plans, all other material employee benefit and fringe benefit
plans, contracts or arrangements and any applicable "change of control" or
similar provisions in any plan, contract or arrangement sponsored,
maintained or contributed to by the Company or any of its Subsidiaries for
the benefit of officers, former officers, employees, former employees,
directors, former directors, or the beneficiaries of any of the foregoing
or pursuant to which the Company or any of its Subsidiaries or ERISA
Affiliates has or may have any liability, contingent or otherwise.
"Consents" shall have the meaning ascribed thereto in
Section 4.4.
"Designated Shareholders" shall mean Mark K. Ruport, Steven
M. Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and Jeanne C.
Logozzo.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall have the meaning ascribed thereto in
Section 2.1(b).
"Environmental Claim" shall mean any and all administrative
or judicial actions, suits, demands, information requests, directives,
claims, liens, investigations, proceedings or notices of noncompliance,
violation or status as a potentially responsible person or otherwise liable
party by any Person (including any Governmental Entity) relating to or
alleging potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs,
cleanup costs, response costs, removal costs, natural resources damages,
property damages, personal injuries, fines or penalties) relating to (A)
the presence, or Release or threatened Release into the environment, of any
Hazardous Materials at any location; or (B) circumstances forming the basis
of any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief relating
to any Environmental Laws.
"Environmental Laws" shall mean, all applicable federal,
state and local laws, rules, requirements, regulations and judicial or
administrative opinions, orders or decrees, and any common law causes of
action, in each case relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or protection of human or employee health or safety
including, without limitation, laws and regulations relating to Releases of
Hazardous Materials.
"Environmental Permits" shall have the meaning ascribed
thereto in Section 2.14(d)(ii).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which
is a member of a "controlled group of corporations," under "common control"
or a member of an "affiliated service group" with the Company or any of its
Subsidiaries within the meaning of Article 414(b), (c) or (m) of the Code,
or required to be aggregated with the Company under Article 414(o) of the
Code, or is under "common control" with the Company, within the meaning of
Article 4001(a)(14) of ERISA, and the regulations promulgated and proposed
thereunder.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Exchange Act shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Existing Rights Agreement" shall have the meaning ascribed
thereto in Section 4.16.
"GAAP" shall have the meaning ascribed thereto in Section
2.5.
"Governmental Entity" shall mean any supernational,
national, foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority.
"Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos or asbestos-containing
materials, urea formaldehyde foam insulation, any form of natural gas,
explosives, polychlorinated biphenyls ("PCBs"), radioactive materials,
ionizing radiation or electromagnetic field radiation; (B) any chemicals,
materials or substances which are included in the definition of "wastes,"
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous substances," "toxic substances," "toxic pollutants,"
"pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance,
regulated under any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder.
"Intellectual Property" shall mean (i) all inventions and
discoveries (whether patentable or unpatentable and whether or not reduced
to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, revisions, extensions and
reexaminations thereof, (ii) all trademarks, service marks, trade dress,
logos, trade names, domain names and corporate names, together with all
translations, derivations and combinations thereof and including all
goodwill associated therewith, and all applications, registrations and
renewals in connection therewith and, to the extent any applications
constitute intent-to-use applications for which no verified statement of
use has been filed, the business, or portion thereof, pertaining thereto,
(iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all mask works and
all applications, registrations and renewals in connection therewith, (v)
all know-how, trade secrets and confidential business information
(including ideas, research and development, formulas, compositions,
manufacturing and production process and techniques, methods, schematics,
technology, flow charts, block diagrams, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (vi) all computer software
(including data and related documentation), (vii) all management
information systems, (viii) all other proprietary rights, (ix) all copies
and tangible embodiments thereof (in whatever form or medium), and (x) all
licenses, sublicenses, permissions, and agreements in connection therewith.
"IRS" shall mean the Internal Revenue Service.
"Knowledge", with respect to the Company, shall mean the
actual knowledge of each member of the Board of Directors of the Company
and the actual knowledge, after reasonable inquiry, of each executive
officer of the Company.
"Laws" shall include all foreign, federal, state, and local
laws, statutes, ordinances, rules, regulations, orders, judgments, decrees
and bodies of law, including, without limitation, (i) any of the foregoing
promulgated by any Governmental Entity and (ii) Environmental Laws.
"Leased Real Property" shall mean the real property leased
or subleased by the Company or any Subsidiary, together with, to the extent
leased or subleased by the Company or any Subsidiary, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Licenses" shall have the meaning ascribed thereto in
Section 2.14(a).
"Litigation" shall have the meaning ascribed thereto in
Section 2.7.
"Losses" shall mean each and all of the following items:
claims, losses, liabilities, obligations, payments, damages, charges,
judgments, fines, penalties, amounts paid in settlement, costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts).
"M&A Transaction" shall have the meaning ascribed thereto in
Section 4.2.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, results of operations, assets,
financial condition or prospects of the Company and its Subsidiaries taken
as a whole, it being understood and agreed that for purposes of this
Agreement, adverse events or circumstances which result from general
economic or financial market conditions or conditions generally affecting
the industry in which the Company operates shall not constitute a Material
Adverse Effect.
"Multi-Employer Plan" shall have the meaning ascribed
thereto in Section 2.12(c).
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation National Market System.
"Owned Real Property" shall mean the real property owned by
the Company or any Subsidiary, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Permitted Encumbrances" shall mean, with respect to any
asset, (i) any imperfection of title with respect to such asset which does
not materially interfere with the present occupancy or use of such asset
and the continuation of the present occupancy or use of such asset; (ii)
such covenants, conditions, restrictions, easements, encroachments or
Encumbrances that are not created pursuant to mortgages or other financing
or security documents, and any other state of facts, which do not,
individually or in the aggregate, materially interfere with the present
occupancy or use of such asset; (iii) mechanic's, materialmen's, landlord
and similar Encumbrances with respect to amounts not yet due and payable or
which are being contested in good faith through appropriate proceedings;
(iv) Encumbrances for Taxes not yet delinquent; and (v) Encumbrances
securing rental payments under capital lease arrangements; and (vi)
Encumbrances securing the Company's indebtedness under the Loan and
Security Agreement, dated March 2, 1998, as amended and other capital
leases in the ordinary course of business.
"Person" shall mean any individual, firm, corporation,
trust, limited liability company, partnership, company or other entity,
including any Governmental Entity.
"Preferred Stock" shall have the meaning ascribed thereto in
the recitals.
"Preferred Stock Designee" shall have the meaning ascribed
thereto in Section 4.6(a).
"Purchasers" shall have the meaning ascribed thereto in the
preamble and, for purposes of Article II herein, any information delivered
to the representatives of such Purchaser shall be deemed received by the
Purchasers.
"Purchasers' Designee" shall have the meaning ascribed
thereto in Section 4.6(b).
"Purchasers' Designee Notice" shall have the meaning
ascribed thereto in Section 4.6(c).
"Purchasers' Expenses" shall have the meaning ascribed
thereto in Section 8.2.
"Purchasers' Indemnified Person" shall have the meaning
ascribed thereto in Section 7.2(a).
"Quarterly Financials" shall have the meaning ascribed
thereto in Section 4.10(a).
"Related Parties" shall mean (i) Affiliates of the Company
and (ii) directors or officers of the Company and their Affiliates
(including any family members of directors and officers), but shall not
include the Subsidiaries or the directors or officers of the Subsidiaries
(except for directors or officers of the Subsidiaries who are also
directors or officers of the Company).
"Release" shall means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata).
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in
Section 2.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Shareholders Agreement" shall have the meaning ascribed
thereto in Section 5.2(a)(iv).
"Subsidiaries" shall have the meaning ascribed thereto in
Section 2.1(b).
"Subsidiary" shall have the meaning ascribed thereto in
Section 2.1(b).
"Systems" shall have the meaning ascribed thereto in Section
2.21(a).
"Tax" and "Taxes" shall mean any federal, state, local or
foreign income, gross receipts, property, sales, use, value added, license,
excise, franchise, capital, net worth, estimated, withholding, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, asset, gains, transfer or excise tax, or any other tax, levy,
custom, duty, impost, governmental fee or other like assessment or charge
of any kind whatsoever, (including any taxes of any other Person owing by
contract, as a transferee or successor, under Treas. Reg. ss. 1.1502-6 or
analogous state, local, or foreign law provision, or otherwise) together
with any interest, penalty or additions to tax, imposed by any Governmental
Entity.
"Terminating Breach" shall have the meaning ascribed thereto
in Section 6.1(d).
"Third Party" shall mean any Person (or group of
Persons) other than the Purchasers.
"Transaction Documents" shall mean this Agreement, the
Shareholders Agreement, the Certificate of Designation, the Registration
Rights Agreement, the Warrant Agreement, the certificates evidencing the
shares of Preferred Stock and Warrants purchased hereunder and all other
contracts, agreements, schedules, certificates and other documents being
delivered pursuant to or in connection with this Agreement or such other
documents or the transactions contemplated hereby or thereby.
"Warrant Agreement" shall have the meaning ascribed thereto
in Section 1.2(b).
"Warrants" shall have the meaning ascribed thereto in the
recitals.
8.2. Fees and Expenses. Only in the event of and at the Closing,
as an adjustment to the Purchase Price, the Company shall reimburse the
Purchasers in cash for its fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and disbursements of its attorneys, accountants,
consultants and other advisors) (collectively, "Purchasers' Expenses");
provided, however, that the portion of the Purchasers' Expenses for which
Purchasers are reimbursed shall not exceed $175,000 in the aggregate.
8.3. Public Announcements. The Purchaser and the Company shall
consult with each other before issuing any press release with respect to
this Agreement or the transactions contemplated hereby and neither shall
issue any such press release or make any such public statement without the
prior consent of the other, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of
the other party, issue such press release or make such public statement as
may upon the advice of counsel be required by Law or the rules and
regulations of the NASDAQ, if it has used reasonable efforts to consult
with the other party prior thereto.
8.4. Restrictive Legends. No shares of Preferred Stock, Warrants
or Common Shares may be transferred without registration under the
Securities Act and applicable state securities laws unless counsel to the
Company shall advise the Company that such transfer may be effected without
such registration. Each certificate representing any of the foregoing shall
bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
8.5. Further Assurances. At any time or from time to time after
the Closing, the Company, on the one hand, and the Purchasers, on the other
hand, agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and to
take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby or by the other Transaction Documents and to otherwise
carry out the intent of the parties hereunder or thereunder.
8.6. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the Company and the Purchasers and the respective
successors, permitted assigns, heirs and personal representatives of the
Company and the Purchasers, provided that the Company may not assign its
rights or obligations under this Agreement to any Person without the prior
written consent of the Purchasers, and provided further that the Purchasers
may not assign its rights or obligations under this Agreement to any Person
(other than a direct or indirect wholly-owned Affiliate of the Purchasers)
without the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which
are for the Purchasers' benefit as a purchaser or holder of Preferred
Stock, Warrants or Shares are also for the benefit of, and enforceable by,
any subsequent holder of such Preferred Stock, Warrants or Shares.
8.7. Entire Agreement. This Agreement and the other Transaction
Documents and the Confidentiality Agreement contain the entire agreement
among the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous arrangements or understandings with respect
thereto.
8.8. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to
such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
Optika Inc.
7450 Campus Drive, 2nd Floor
Colorado Springs, Colorado 80920
Telecopy: (719) 531-0199
Attention: Steven Johnson
Vice President and Chief Financial Officer
with a copy to (which shall not constitute notice):
E*Law Group
3555 W. 110th Place
Westminster, Colorado 80031
Telecopy: (303) 410-0468
Attention: Jeremy W. Makarechian, Esq.
and to:
Morrison & Foerster LLP
370 17th Street, Suite 5200
Denver, Colorado 30202
Telecopy: (303) 592-1510
Attention: Warren L. Troupe, Esq.
(ii) if to the Purchasers,
Thomas Weisel Capital Partners, L.P.
c/o Thomas Weisel Capital Partners, L.L.C.
One Montgomery Street, Suite 3700
San Francisco, California 94104
Telecopy: (415) 364-2698
Attention: Marianne Winkler
RKB Capital, L.P.
150 West Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 404-9266
Attention: Peter Schleider
with copies to (which shall not constitute notice):
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: F. William Reindel, Esq.
All such notices, requests, consents and other
communications shall be deemed to have been given or made if and when
delivered personally or by overnight courier to the parties at the above
addresses or sent by electronic transmission, with confirmation received,
to the telecopy numbers specified above (or at such other address or
telecopy number for a party as shall be specified by like notice).
8.9. Amendments. The terms and provisions of this Agreement may
be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, in a writing executed and delivered by the Company and the
Purchasers. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
Any consent or waiver (whether or not contemplated by this Agreement) to be
made by the Purchasers shall be made by a majority in interest of the
Purchasers on behalf of all the Purchasers.
8.10. Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
8.11. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
8.12. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or thereto
except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement shall be effective service of process
for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Litigation arising out of this Agreement or
the transactions contemplated hereby in the courts of the State of New York
or the United States of America, in each case located in the County of New
York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such Litigation brought in
any such court has been brought in an inconvenient forum.
8.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS HEREBY
WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
8.16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid,
but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
Optika Inc.
By: /s/ Mark K. Ruport
-----------------------------
Name: Mark K. Ruport
Title: President & CEO
[Optika Signature Page - Stock Purchase Agreement]
<PAGE>
PURCHASERS
- ----------
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: /s/ Deborah Bernstein
-------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: /s/ Deborah Bernstein
-------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: /s/ Deborah Bernstein
-------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: /s/ Deborah Bernstein
-------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: /s/ Deborah Bernstein
-------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
[Purchasers Signature Page - Securities Purchase Agreement]
<PAGE>
PURCHASERS
RKB CAPITAL, L.P.
By: /s/ Peter Schleider
------------------------------------
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Securities Purchase Agreement]
EXHIBIT 3
OPTIKA INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, Optika Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware
("DGCL"), DOES HEREBY CERTIFY that:
Pursuant to the authority conferred upon the Board of Directors
of the Corporation by Article IVB of the Second Amended and Restated
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151(g) of
the DGCL, the Board of Directors of the Corporation on February 21, 2000,
adopted the following resolution creating a series of Preferred Stock
designated as Series A Convertible Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the DGCL and the provisions
of the Certificate of Incorporation, a series of the class of authorized
Preferred Stock, par value $0.001 per share, of the Corporation is hereby
created and that the designation and number of shares thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows (capitalized terms
used herein shall have the meanings set forth in Section 12 hereof or
otherwise in this Certificate of Designation):
SECTION 1. DESIGNATION; NUMBER; RANK.
(a) Designation; Number. The shares of such series shall be
designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock"). The number of shares constituting the Series A Preferred Stock
shall be 731,851.
(b) Rank. The Series A Preferred Stock shall, with respect to
rights on liquidation, dissolution or winding up, rank senior to the Common
Stock, par value $0.001 per share, of the Corporation (the "Common Stock")
and all other capital stock of the Corporation issued prior to or on or
after the date hereof.
SECTION 2. DIVIDENDS.
So long as any shares of Series A Preferred Stock remain
outstanding, if the Corporation pays a dividend in cash, securities or
other property on shares of Common Stock then, at the same time, the
Corporation shall declare and pay a dividend on each outstanding share of
Series A Preferred Stock in the same amount and form as would be paid on
the shares of Common Stock into which such share of Series A Preferred
Stock would be converted if such shares were converted into shares of
Common Stock on the record date for such Common Stock dividends (or if no
record date is established, at the date such dividend is declared), it
being understood that the holders of Series A Preferred Stock shall
participate in Common Stock dividends as aforesaid without having to
convert to shares of Series A Preferred Stock held by such holders.
SECTION 3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) (i) If the Corporation shall (A) commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or (B) consent to the entry of an
order for relief in an involuntary case under such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation, or of any
substantial part of its property, or (C) make an assignment for the benefit
of its creditors, or (D) admit in writing its inability to pay its debts
generally as they become due, or (ii)(x) if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction
in the premises in an involuntary case under the Federal bankruptcy laws or
any other applicable Federal or state bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and (y) any such decree or order shall be unstayed and in
effect for a period of 60 consecutive days and on account of any such event
the Corporation shall liquidate, dissolve or wind up or (iii) if the
Corporation shall otherwise liquidate, dissolve or wind up, after payment
or provision for the payment for the debts and other liabilities of the
Corporation (each, a "Liquidation"), no distribution shall be made to the
holders of shares of Junior Stock or Parity Stock unless, prior thereto,
the holders of shares of Series A Preferred Stock shall have received, in
cash, with respect to each share of Series A Preferred Stock, the greater
of (A) the Liquidation Preference with respect to such share of the Series
A Preferred Stock; and (B) the amount which would have been paid upon any
such Liquidation in respect of the aggregate number of shares of Common
Stock into which such share of Series A Preferred Stock is then
convertible, it being understood that holders of Series A Preferred Stock
may be deemed to participate in the amount receivable by the holders of
Common Stock as aforesaid in this clause (B) without having to convert the
shares of Series A Preferred Stock held by such holders (the greater of the
amounts set forth in clause (A) and (B) above with respect to any share of
Series A Preferred Stock, the "Preference Amount," and the aggregate such
amount for all outstanding shares of Series A Preferred Stock, the
"Aggregate Preference Amount").
(b) If, upon any such Liquidation, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series A
Preferred Stock shall be insufficient to permit payment of the full amount
of the Preference Amount with respect to each share of Series A Preferred
Stock, then the entire assets of the Corporation to be distributed among
the holders of the Series A Preferred Stock shall be distributed ratably
among such holders in accordance with the number of shares of Series A
Preferred Stock held by each such holder in proportion to the ratio that
the Preference Amount payable on each such share bears to the Aggregate
Preference Amount.
(c) After the payment to the holders of shares of the Series A
Preferred Stock of the full amount of any liquidating distribution to which
they are entitled under this Article 3, the holders of the Series A
Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
(d) Whenever the distribution provided for in this Section 3
shall be payable in securities or property other than cash, the value of
such distribution shall be the Fair Market Value of such securities or
property.
SECTION 4. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders of
shares of Series A Preferred Stock shall have the voting rights set forth
in this Section 4:
(a) (i) Right to Vote as a Single Class with Holders of Common
Stock. So long as any of the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote
on all matters submitted to a vote of the stockholders of the Corporation,
voting together as a single class with the holders of Common Stock. The
holders of each share of Series A Preferred Stock shall be entitled to vote
with respect to each share of Series A Preferred Stock held by each such
holder a number of votes equal to the number of votes which could be cast
in such vote by a holder of the number of shares of Common Stock into which
such share of Series A Preferred Stock is then convertible on the record
date for such vote without such holder being required to convert such
shares. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after
aggregation of all shares of Common Stock into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to
the nearest whole number (with one-half being rounded upward).
(ii) Right to Elect a Director. On the Issue Date, the Board
of Directors shall cause the total number of directors then constituting
the whole Board of Directors to be fixed at eight. The holders of the
outstanding shares of Series A Preferred Stock shall be entitled to
designate one director for election to the Board of Directors of the
Corporation as a Class I director and, voting separately as a series, shall
have the exclusive right to vote for the election of such designee to the
Board of Directors for so long as the Purchasers under the Securities
Purchase Agreement and their affiliates own in excess of the Ownership
Threshold (as defined in the Securities Purchase Agreement). Any such
designee may be removed with or without cause by the holders of the Series
A Preferred Stock.
(iii) No Right to Class Vote on Certain Transactions.
Subject to the rights of holders of shares of Series A Preferred Stock set
forth in Sections 4(a)(i), 8 and 10, the Corporation may, without the
consent of any holder of Series A Preferred Stock, consolidate with or
merge with or into, or convey, transfer or lease all or substantially all
its assets as an entirety to, any Person, provided that: (A) the successor,
transferee or lessee (if not the Corporation) is organized and existing
under the laws of the United States of America or any State thereof or the
District of Columbia and the Series A Preferred Stock shall be converted
into or exchanged for and shall become shares of, or interests in, such
successor, transferee or lessee, having in respect of such successor,
transferee, or lessee substantially the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, that the Series A
Preferred Stock has immediately prior to such transaction; and (B) the
Corporation delivers to the transfer agent an officers' certificate and
provides reasonable evidence that such consolidation, merger, conveyance,
transfer or lease complies with this Certificate of Designation. In the
event of any consolidation or merger or conveyance, transfer or lease of
all or substantially all of the assets of the Corporation that is permitted
pursuant to this subparagraph (iii), the successor resulting from such
consolidation or into which the Corporation is merged or the transferee or
lessee to which such conveyance, transfer or lease is made, will succeed
to, and be substituted for, and may exercise every right and power of, the
Corporation with respect to the Series A Preferred Stock (or the shares or
interests into, or for which, the Series A Preferred Stock is converted or
exchanged), and thereafter, except in the case of a lease, the predecessor
(if still in existence) shall be released from its obligations and
covenants with respect to the Series A Preferred Stock.
(b) Actions Not to be Taken Without Vote of Holders of Series A
Preferred Stock. So long as any shares of Series A Preferred Stock are
outstanding, the affirmative vote of the holders of a majority of the
shares of Series A Preferred Stock outstanding at the time of such vote
shall be required in order to:
(i) authorize, increase the authorized number of shares of,
or issue (including on conversion, exercise or exchange of any convertible,
exercisable or exchangeable securities or by reclassification) (A) any
shares of any class or classes or series within a class of the
Corporation's capital stock ranking prior to (either as to dividends or
upon Liquidation) the Series A Preferred Stock, or (B) any Parity Stock;
(ii) increase the authorized number of shares of, or issue
(including on conversion, exercise or exchange of any convertible,
exercisable or exchangeable securities or by reclassification) any shares
of, Series A Preferred Stock other than as authorized by this Certificate
of Designation; or
(iii) reclassify any shares of Series A Preferred Stock or
authorize, adopt or approve an amendment to the Certificate of
Incorporation or this Certificate of Designation which would increase or
decrease the par value of the shares of Series A Preferred Stock, or alter
or change the powers, preferences or special rights of the Series A
Preferred Stock.
(c) Exercise of Voting Rights. (i) The foregoing rights of
holders of shares of Series A Preferred Stock to take any actions (A) as
provided in Section 4(a)(i) may be exercised at any annual meeting of
stockholders or at a special meeting of stockholders held for such purpose
or at any adjournment thereof and (B) as provided in Sections 4(a)(ii) and
4(b) may be exercised at any annual meeting of holders of Series A
Preferred Stock or at a special meeting of holders of Series A Preferred
Stock held for such purpose or at any adjournment thereof. The Chairman of
the Board of the Corporation may call, and if the holders of Series A
Preferred Stock are to vote separately as a single class, upon the written
request of holders of record of 20% of the outstanding shares of Series A
Preferred Stock, addressed to the Secretary of the Corporation, at the
principal office of the Corporation, the Chairman of the Board of the
Corporation shall call, a special meeting of the holders of shares of
Series A Preferred Stock entitled to vote as provided herein. The
Corporation shall use its best efforts to hold such meeting within 10, but
in any event not later than 20, days after delivery of such request to the
Secretary, upon the notice specified by the requesting holders of Series A
Preferred Stock or if not so specified as provided by law and in the
By-Laws of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series A Preferred Stock shall have the right, voting separately
as a single class, to take any action, the presence in person or by proxy
of the holders of record of one-half of the total number of shares of
Series A Preferred Stock then outstanding and entitled to vote on the
matter shall be necessary and sufficient to constitute a quorum. At any
such meeting or at any adjournment thereof, in the absence of a quorum of
the holders of shares of Series A Preferred Stock, a majority of the
holders of such shares present in person or by proxy shall have the power
to adjourn the meeting as to the actions to be taken by the holders of
shares of Series A Preferred Stock from time to time and place to place
without notice other than announcement at the meeting until a quorum shall
be present.
(iii) For the taking of any action as provided in Sections
4(a)(ii) or 4(b) by the holders of shares of Series A Preferred Stock, each
such holder shall have one vote for each share of such stock standing in
his name on the transfer books of the Corporation as of any record date
fixed for such purpose or, if no such date be fixed, at the close of
business on the Business Day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the Business Day
next preceding the day on which the meeting is held.
SECTION 5. RESTRICTIONS ON DISTRIBUTIONS IN RESPECT OF COMMON
STOCK.
(a) For so long as any shares of Series A Preferred Stock shall
remain outstanding, (A) upon the occurrence and during the continuance of
any default by the Corporation in respect of its obligations in favor of
any holders of the Series A Preferred Stock, including any obligation to
redeem shares of Series A Preferred Stock under Section 5 or repurchase
shares of Series A Preferred Stock under Section 10 and (B) from the date
of an Other Liquidation Event or Public Company Liquidation Event to the
Other Liquidation Event Payment Date, the Corporation shall not declare or
pay any dividends or make any distributions, whether in cash, securities or
other property, upon, nor shall the Corporation redeem, purchase or
otherwise acquire for consideration any shares of Parity Stock or Junior
Stock, other than the repurchase of shares of capital stock or securities
convertible into or exchangeable for capital stock of the Corporation held
by directors or employees of the Corporation pursuant to employee benefit
plans approved by the Board of Directors.
(b) The Corporation shall not permit any subsidiaries of the
Corporation to purchase or otherwise acquire for consideration any shares
of capital stock of the Corporation unless the Corporation could, pursuant
to clause (a) of this Section 5, purchase such shares at such time and in
such manner.
SECTION 6. REDEMPTION.
(a) Optional Redemption. (i) Subject to the rights of holders of
shares of Series A Preferred Stock set forth in Section 8 hereof, the
Corporation shall, at any time following the first anniversary of the Issue
Date, have the right, at its sole option and election made in accordance
with clause (a)(ii) below, to redeem, to the extent the Corporation shall
have the funds legally available therefor, all, but not less than all, of
the then outstanding shares of Series A Preferred Stock within 70 days
following any date (the "Redemption Trigger Date") on which the Market
Price per share of Common Stock for each of at least 20 out of 22
consecutive Trading Days immediately preceding such date is equal to or
greater than $40.992 (subject to appropriate adjustment for stock
dividends, splits, combinations and similar events affecting the Common
Stock) (the "Trigger Price") for an amount in cash per share of Series A
Preferred Stock equal to the Liquidation Preference of such share (the
"Optional Redemption Price") as of the Optional Redemption Date (as defined
below).
(ii) Notice of any redemption of shares of Series A
Preferred Stock pursuant to clause (a)(i) shall be mailed, first class
postage prepaid, to each holder of shares of Series A Preferred Stock, at
such holder's address as it appears on the transfer books of the
Corporation, specifying (x) the Optional Redemption Price and (y) the
redemption date (the "Optional Redemption Date"); and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, such holder's certificate or certificates representing the
shares to be redeemed (the "Optional Redemption Notice"). The Optional
Redemption Notice shall be mailed not more than 35 days following the
applicable Redemption Trigger Date. The Optional Redemption Date shall be
determined by the Corporation but in no event shall be earlier than the
10th day following the date of receipt by the holders of Series A Preferred
Stock of the Redemption Notice or later than the 35th day following the
Redemption Notice. The Redemption Notice shall be revocable by the
Corporation by notice to the holders of Series A Preferred Stock received
by such holders on or prior to the fifth Business Day prior to the Optional
Redemption Date.
(b) Mandatory Redemption. (i) Subject to the rights of holders of
shares of Series A Preferred Stock set forth in Section 8 hereof, the
Corporation shall, on the eighth anniversary of the Issue Date (such date,
the "Mandatory Redemption Date"), redeem, to the extent the Corporation
shall have the funds legally available therefor, all, but not less than
all, of the then outstanding shares of Series A Preferred Stock for an
amount in cash per share of Series A Preferred Stock equal to the
Liquidation Preference of such share (the "Mandatory Redemption Price") as
of the Mandatory Redemption Date. If the funds of the Corporation legally
available for redemption of shares of Series A Preferred Stock on the
Mandatory Redemption Date are insufficient to redeem the total number of
shares to be redeemed on such date, those funds which are legally available
will be used to redeem the maximum possible number of such shares ratably
among the holders of such shares to be redeemed based upon the number of
shares of Series A Preferred Stock held by each such holder. The shares of
Series A Preferred Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided in this Certificate of
Designation at any time. Thereafter, when sufficient additional funds of
the Corporation are legally available for the redemption of shares of
Series A Preferred Stock that remain outstanding, such funds shall
immediately be used to redeem the entire balance of the shares of Series A
Preferred Stock that the Corporation has become obliged to redeem on the
Mandatory Redemption Date but which the Corporation has not redeemed.
(ii) Notice of any redemption of shares of Series A
Preferred Stock pursuant to clause (b)(i) shall be mailed, first class
postage prepaid, to each holder of shares of Series A Preferred Stock, at
such holder's address as it appears on the transfer books of the
Corporation, specifying (x) the number of shares of Series A Preferred
Stock to be redeemed, (y) the Mandatory Redemption Price and (z) the
Mandatory Redemption Date; and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, such holder's
certificate or certificates representing the shares to be redeemed (the
"Mandatory Redemption Notice"). The Mandatory Redemption Notice shall be
mailed not less than 25 and not more than 45 days prior to the Mandatory
Redemption Date.
(c) Payment of Redemption Price. On the date of any redemption
pursuant to this Section 6, (i) the Corporation shall pay, in cash or by
wire transfer of immediately available funds to an account designated by
each holder, the Optional Redemption Price or the Mandatory Redemption
Price, as the case may be, for each of its shares of Series A Preferred
Stock, and (ii) after payment has been made in accordance with clause (i)
above, all rights of the holders thereof as holders of Series A Preferred
Stock of the Corporation shall cease.
SECTION 7. STATUS OF CONVERTED OR REDEEMED STOCK.
Any shares of Series A Preferred Stock converted, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares of Series A Preferred Stock shall upon their cancellation, and
upon the filing of any document required by the DGCL, become authorized but
unissued shares of Preferred Stock, $0.001 par value, of the Corporation
and may be reissued as part of another series of Preferred Stock, $0.001
par value, of the Corporation.
SECTION 8. CONVERSION.
(a) Right to Convert. Subject to the provisions for adjustment
hereinafter set forth, the holders of Series A Preferred Stock shall have
the right following the Issue Date at any time in whole and from time to
time in part, at such holder's option, to convert any or all outstanding
shares (and fractional shares) of Series A Preferred Stock into Common
Stock as set forth hereinafter. Each share of Series A Preferred Stock
shall be convertible into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Liquidation
Preference as of the Conversion Date by the Conversion Price as of the
Conversion Date. The Conversion Price shall be the Initial Conversion Price
(as defined in paragraph (e) below) as adjusted in accordance with clauses
(f) and (g) of this Section 8.
(b) Mechanics of Conversion. Conversion of the Series A Preferred
Stock may be effected by any such holder upon the surrender to the
Corporation at the principal office of the Corporation or at the office of
any agent or agents of the Corporation, as may be designated by the Board
of Directors of the Corporation (the "Transfer Agent"), of the
certificate(s) for such Series A Preferred Stock to be converted,
accompanied by a written notice (the date of such notice being referred to
as the "Conversion Date") stating that such holder elects to convert all or
a specified whole number of such shares in accordance with the provisions
of this Section 8 and specifying the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be
issued. In case any holder's notice shall specify a name or names other
than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in
such name or names. Other than such taxes, the Corporation will pay any and
all transfer, issue, stamp and other taxes (other than taxes based on
income) that may be payable in respect of any issue or delivery of shares
of Common Stock on conversion of Series A Preferred Stock pursuant hereto.
As promptly as practicable, and in any event within five Business Days
after the surrender of such certificate or certificates and the receipt of
such notice relating thereto and, if applicable, payment of all transfer
taxes which are the responsibility of the holder as set forth above (or the
demonstration to the satisfaction of the Corporation that such taxes have
been paid), the Corporation shall deliver or cause to be delivered (i)
certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock, to which the holder of shares of
Series A Preferred Stock being converted shall be entitled and (ii) if less
than the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new
certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number
of shares being converted. Such conversion shall be deemed to have been
made at the close of business on the Conversion Date so that the rights of
the holder thereof as to the shares being converted shall cease except for
the rights pursuant to Section 8(c) to receive shares of Common Stock, in
accordance herewith, and payment for any fractional share and the person
entitled to receive the shares of Common Stock shall be treated for all
purposes as having become the record holder of such shares of Common Stock
at such time.
In case any shares of Series A Preferred Stock are to be redeemed
pursuant to Section 6, such right of conversion shall continue in effect
through the close of business on the Business Day preceding the applicable
redemption date and thereafter shall cease and terminate as to the shares
of Series A Preferred Stock to be redeemed unless the Corporation shall
default in making payment of the amount payable upon such redemption.
(c) Fractional Shares. In connection with the conversion of any
shares of Series A Preferred Stock into Common Stock, no fractions of
shares of Common Stock shall be issued, but in lieu thereof the Corporation
shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Market Price per
share of Common Stock on the Trading Day on which such shares of Series A
Preferred Stock are deemed to have been converted. If more than one share
of Series A Preferred Stock shall be surrendered for conversion by the same
holder at the same time, the number of full shares of Common Stock issuable
on conversion thereof shall be computed on the basis of the total number of
shares of Series A Preferred Stock so surrendered. Promptly upon
conversion, the Corporation shall pay to the holder of shares of Series A
Preferred Stock so converted, out of funds legally available, an amount in
cash, or by wire transfer of same day funds, in lieu of any fractional
interest of such holder.
(d) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available for issuance upon
the conversion of the Series A Preferred Stock, free from any preemptive
rights, such number of its authorized but unissued shares of Common Stock
as will from time to time be sufficient to permit the conversion of all
outstanding shares of Series A Preferred Stock issued pursuant to this
Certificate of Designation into Common Stock, and shall take all actions
required to increase the authorized number of shares of Common Stock if
necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.
(e) Initial Conversion Price. The initial Conversion Price shall
equal $20.496 (the "Initial Conversion Price").
(f) (i) Adjustment to Conversion Price for Stock Dividends and
for Combinations or Subdivisions of Common Stock. (i) In case the
Corporation shall at any time or from time to time after the Issue Date (A)
pay a dividend or make a distribution on the outstanding shares of Common
Stock in shares of Common Stock, (B) subdivide or split the outstanding
shares of Common Stock, (C) combine or reclassify the outstanding shares of
Common Stock into a smaller number of shares or (D) issue by
reclassification of the shares of Common Stock any shares of capital stock
of the Corporation, then, and in each such case, the Conversion Price in
effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the holder of any shares of
Series A Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other
securities of the Corporation which after the happening of any of the
events described above such shares of Series A Preferred Stock would have
been entitled had such shares of Series A Preferred Stock been surrendered
for conversion immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, split, reclassification or combination, at the close of
business on the day upon which such corporate action becomes effective.
Such adjustment shall be made successively whenever an event listed above
shall occur. No adjustment shall be made pursuant to this clause (i) in
connection with any transaction to which clause (g) applies.
(ii) In case the Corporation shall issue shares of Common
Stock (or rights, warrants or other securities convertible into or
exercisable or exchangeable for shares of Common Stock) (collectively,
"Additional Shares") after the Issue Date at a price per share (or having a
conversion or exercise price per share) less than the Current Market Price
as of the date of issuance of such shares (or, in the case of convertible
or exchangeable securities, less than the Current Market Price as of the
date of issuance of the rights, warrants or other securities in respect of
which shares of Common Stock were issued), then, and in each such case, the
Conversion Price shall be reduced to an amount determined by multiplying
(A) the Conversion Price in effect on the day immediately prior to the date
of issuance of such Additional Shares by (B) a fraction, the numerator of
which shall be the sum of (1) the number of shares of Common Stock
Outstanding immediately prior to such sale or issue multiplied by the then
applicable Current Market Price per share and (2) the aggregate
consideration receivable by the Corporation for the total number of shares
of Common Stock so issued (or into or for which the rights, warrants or
other convertible securities may convert or be exercisable or
exchangeable), and the denominator of which shall be the sum of (x) the
total number of shares of Common Stock Outstanding immediately prior to
such sale or issue and (y) the number of Additional Shares issued (or into
or for which the rights, warrants or convertible securities may be
converted, exercised or exchanged), multiplied by the Current Market Price.
An adjustment made pursuant to this clause (ii) shall be made on the next
Business Day following the date on which any such issuance is made and
shall be effective retroactively to the close of business on the date of
such issuance of Additional Shares. For purposes of this clause (ii), the
aggregate consideration receivable by the Corporation in connection with
the issuance of shares of Common Stock or of rights, warrants or
convertible securities shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common
Stock, rights, warrants and convertible securities plus the aggregate
amount (as determined on the date of issuance), if any, payable upon
exercise or conversion of any such rights, warrants and convertible
securities into shares of Common Stock. If, subsequent to the date of
issuance of such right, warrants or other convertible securities, the
exercise or conversion price thereof is reduced, such aggregate amount
shall be recalculated and the Conversion Price shall be adjusted
retroactively to give effect to such reduction. On the expiration of any
option or the termination of any right to convert or exchange any
securities into Additional Shares, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would
have been in effect at the time of such expiration or termination (but
taking into account other adjustments made following the time of issuance
of such securities) had such security, to the extent outstanding
immediately prior to such expiration or termination, never been issued. In
case any portion of the consideration to be received by the Corporation
shall be in a form other than cash, the Fair Market Value of such non-cash
consideration shall be utilized in the foregoing computation. If Common
Stock is sold as a unit with other securities, the aggregate consideration
received for such Common Stock shall be deemed to be net of the Fair Market
Value of such other securities. The issuance or reissuance of (i) any
shares of Common Stock or rights, warrants or other securities convertible
into shares of Common Stock (whether treasury shares or newly issued
shares) (A) pursuant to a dividend or distribution on, or subdivision,
split, combination or reclassification of, the outstanding shares of Common
Stock requiring an adjustment in the Conversion Price pursuant to clause
(i) of this clause (f); (B) pursuant to any restricted stock or stock
option plan or stock purchase program of the Corporation involving the
grant of options or rights to acquire Common Stock to directors, officers
and employees and, in the case of options, consultants and service
providers, of the Corporation and its subsidiaries so long as (x) the
granting of such options or rights has been approved by the Board of
Directors and (y) the aggregate consideration receivable by the Corporation
in connection with such options shall be no less than fair market value, as
determined by the Board of Directors, and in connection with such rights
under the employee stock purchase plan of the Corporation shall be no less
than 85% of the fair market value, as determined by the Board of Directors,
in each case of the Common Stock underlying such options or rights on the
date of grant; (C) pursuant to any option, warrant, right, or convertible
security outstanding as of the Issue Date, or (ii) the Series A Preferred
Stock and the Warrants issuable pursuant to the Securities Purchase
Agreement and any shares of Common Stock issuable upon conversion or
exercise thereof, shall not be deemed to constitute an issuance of Common
Stock or convertible securities by the Corporation to which this clause
(f)(ii) applies; provided that, notwithstanding clause (i)(C), the
Conversion Price shall be appropriately reduced to the extent that the
number of shares into which any such security may be converted, exercised
or exchanged is increased or the price therefor is reduced after the Issue
Date. No adjustment shall be made pursuant to this clause (f)(ii) in
connection with any transaction to which clause (g) applies.
(iii) In case the Corporation shall fix a record date for
the issuance on a pro rata basis of rights, options or warrants to the
holders of its Common Stock (or other securities convertible into or
exercisable or exchangeable for shares of Common Stock) entitling such
holders to subscribe for or purchase shares of Common Stock (or securities
convertible into or exercisable or exchangeable for shares of Common Stock)
at a price per share of Common Stock (or having a conversion, exercise or
exchange price per share of Common Stock, in the case of a security
convertible into, or exerciseable or exchangeable for, shares of Common
Stock) less than the Current Market Price on such record date, the maximum
number of shares of Common Stock issuable upon exercise of such rights,
options or warrants (or conversion of such convertible securities) shall be
deemed to have been issued and outstanding as of such record date and the
Conversion Price shall be adjusted pursuant to paragraph 8(f)(ii) hereof,
as though such maximum number of shares of Common Stock had been so issued
for an aggregate consideration payable by the holders of such rights,
options, warrants or other securities prior to their receipt of such shares
of Common Stock. Such adjustment shall be made successively whenever such
record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire in whole or in part unexercised, or in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this paragraph 8(f)), the Conversion Price shall again be adjusted as
follows: (A) in the event that all of such rights, options or warrants
expire unexercised, the Conversion Price shall be the Conversion Price that
would then be in effect if such record date had not been fixed; (B) in the
event that less than all of such rights, options or warrants expire
unexercised, the Conversion Price shall be adjusted pursuant to paragraph
8(f)(ii) to reflect the maximum number of shares of Common Stock issuable
upon exercise of such rights, options or warrants that remain outstanding
(without taking into effect shares of Common Stock issuable upon exercise
of rights, options or warrants that have lapsed or expired); and (C) in the
event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled, the Conversion
Price shall be adjusted to reflect the Conversion Price which would then be
in effect if such holder had initially been entitled to such changed number
of shares of Common Stock. Notwithstanding the foregoing, in case the
Corporation shall issue rights, options or warrants ("Stockholder Rights")
to all holders of its Common Stock entitling the holders thereof to
subscribe for or purchase shares of Common Stock, which rights or warrants
(i) are deemed to be transferred with such shares of Common Stock, (ii) are
not exercisable and (iii) are also issued in respect of future issuances of
Common Stock, in each case in clauses (i) through (iii) until the
occurrence of a specified event or event ("Trigger Event"), such
Stockholder Rights shall for purposes of this clause (iii) not be deemed
issued or distributed until the occurrence of the earliest Trigger Event
and the conversion price shall not be reduced until the occurrence of such
earliest Trigger Event.
(iv) In case the Corporation shall fix a record date for the
making of a distribution to all holders of any class of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property, the Conversion Price to be in
effect after such record date shall be determined by multiplying the
Conversion Price in effect immediately prior to such record date by a
fraction, (A) the numerator of which shall be the Conversion Price
immediately prior to such distributions less the Fair Market Value of the
portion of the assets, other property or evidence of indebtedness so to be
distributed which is applicable to one share of Common Stock and (B) the
denominator of which shall be the Conversion Price immediately prior to
such distributions. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not
so made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
An adjustment to the Conversion Price also shall be made in respect of
dividends and distributions paid exclusively in cash to all holders of any
class of Common Stock (excluding any dividend or distribution in connection
with the Liquidation of the Corporation, whether voluntary or involuntary,
and any cash that is distributed upon a merger, consolidation or other
transaction for which an adjustment pursuant to paragraph 8(g) is made) or
in the case where the Corporation effects any repurchase of its Common
Stock where the sum of (1) all such cash dividends and distributions made
within the preceding 12 months in respect of which no adjustment has been
made and (2) any cash and the Fair Market Value of other consideration paid
in respect of any repurchases of Common Stock by the Corporation or any of
its subsidiaries within the preceding 12 months in respect of which no
adjustment has been made, exceeds 5% of the Corporation's market
capitalization (being the product of the then Current Market Price of the
Common Stock times the aggregate number of shares of Common Stock then
outstanding on the record date for such distribution). The Conversion Price
to be in effect after such adjustment shall be determined by subtracting
from the Conversion Price in effect prior to such adjustment an amount
equal to the quotient of (A) the sum of clause (1) and clause (2) above and
(B) the number of shares of Common Stock outstanding on the date such
adjustment is to be determined.
(v) The term "dividend," as used in this clause (f), shall
mean a dividend or other distribution upon the capital stock of the
Corporation.
(vi) Anything in this clause (f) to the contrary
notwithstanding, the Corporation shall not be required to give effect to
any adjustment in the Conversion Price (x) if, in connection with any event
which would otherwise require an adjustment pursuant to this clause (f),
the holders of Series A Preferred Stock have received the dividend or
distribution to which such holders are entitled under Section 2 hereof or
(y) unless and until the net effect of one or more adjustments (each of
which shall be carried forward), determined as above provided, shall have
resulted in a change of the Conversion Price such that the number of shares
of Common Stock receivable upon conversion of each share of Series A
Preferred Stock would differ by at least one two-hundredth of one share of
Common Stock, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price by at
least one two-hundredth of one share of Common Stock, such change in
Conversion Price shall thereupon be given effect. All calculations under
this Section 8 shall be made to the nearest four decimal points.
(vii) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of
Directors of the Corporation (which may be the firm of independent public
accountants regularly employed by the Corporation) shall be presumptively
correct for any computation made under this clause (f).
(viii) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend
or other distribution, and shall thereafter and before the distribution to
stockholders legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of
Common Stock issuable upon exercise of the right of conversion granted by
this clause (f) or in the Conversion Price then in effect shall be required
by reason of the taking of such record.
(ix) If any event occurs as to which the provisions of this
Section 8(f) are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holders of the Series A Preferred
Stock in accordance with the essential intent and principles of such
provisions, the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent
and principles, so as to protect such rights of the holders of the Series A
Preferred Stock.
(g) Adjustment to Conversion Price for Reclassification and
Reorganization. In the case of any consolidation or merger or
reclassification in connection therewith of the Corporation with or into
another corporation (a "Transaction") occurring at any time, each share of
Series A Preferred Stock then outstanding shall thereafter be convertible
into, in lieu of the Common Stock issuable upon such conversion prior to
consummation of such Transaction, the kind and amount of shares of stock
and other securities and property receivable (including cash) upon the
consummation of such Transaction by a holder of that number of shares of
Common Stock into which one share of Series A Preferred Stock was
convertible immediately prior to such Transaction. In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be
deemed to apply, so far as appropriate and nearly as may be, to such other
securities or property. The Corporation, or the person formed by the
consolidation or resulting from the merger or which acquires such assets or
which acquires the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other
constituent document to establish such rights and such rights shall be
clearly provided for in the definitive transaction documents relating to
such Transaction. The certificate or articles of incorporation or other
constituent document shall provide for adjustments, which, for events
subsequent to the effective date of the certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 8.
The provisions of this Section 8(g) shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(h) Notice of Record Date. In case at any time or from time to
time (i) the Corporation shall pay any stock dividend or make any other
non-cash distribution to the holders of its Common Stock, or offer for
subscription pro rata to the holders of its Common Stock any additional
shares of stock of any class or any other right, or (ii) there shall be any
capital reorganization or reclassification of the Common Stock of the
Corporation or consolidation or merger of the Corporation with or into
another corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an
entirety, (iii) there shall be a Liquidation of the Corporation, or (iv) an
Other Liquidation Event or Public Company Liquidation Event shall occur,
then, in any one or more of said cases the Corporation shall give at least
20 days' prior written notice (the time of mailing of such notice shall be
deemed to be the time of giving thereof) to the registered holders of the
Series A Preferred Stock at the addresses of each as shown on the books of
the Corporation maintained by the Transfer Agent thereof of the date on
which (A) a record shall be taken for such stock dividend, distribution or
subscription rights or (B) such reorganization, reclassification,
consolidation, merger, sale or conveyance or Liquidation shall take place,
as the case may be; provided that, in the case of any Transaction to which
clause (g) applies the Corporation shall give at least 30 days' prior
written notice as aforesaid. Such notice shall also specify the date as of
which the holders of the Common Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such Liquidation, as the case may be. Failure
to give such notice shall not invalidate any action so taken.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Upon any adjustment of the Conversion Price then in effect and
any increase or decrease in the number of shares of Common Stock issuable
upon the operation of the conversion provisions set forth in Section 8,
then, and in each such case, the Corporation shall promptly deliver to the
holders of the Series A Preferred Stock and the Transfer Agent of the
Common Stock, a certificate signed by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Price then in effect following
such adjustment and the increased or decreased number of shares issuable
upon a conversion following such adjustment, and shall set forth in
reasonable detail the method of calculation of each and a brief statement
of the facts requiring such adjustment. Where appropriate, such notice to
holders of the Series A Preferred Stock may be given in advance and
included as part of the notice required under the provisions of Section
8(h).
SECTION 10. OTHER LIQUIDATION EVENT.
(a) Offer to Repurchase. Upon the occurrence of an Other
Liquidation Event or a Public Company Liquidation Event, the Corporation
shall make an offer (an "Other Liquidation Event Offer") to each holder of
shares of Series A Preferred Stock to repurchase any and all of each such
holder's shares of Series A Preferred Stock at an offer price per share of
Series A Preferred Stock in cash equal to (i) the Liquidation Preference
then in effect in the event of a Public Company Liquidation Event or (ii)
the Preference Amount in the event of an Other Liquidation Event
(calculating clause (B) of the definition of Preference Amount for these
purposes as the amount of cash and the Fair Market Value of any other
consideration which is receivable upon, and/or retained by the holder upon,
any such Other Liquidation Event in respect of the aggregate number of
shares of Common Stock into which such share of Series A Preferred Stock is
then convertible). The Corporation shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of shares of Series A
Preferred Stock as a result of an Other Liquidation Event or Public Company
Liquidation Event, and the Corporation shall not be in violation of this
Certificate of Designation by reason of any act required by such rule or
other applicable law.
(b) Within 20 days following any Other Liquidation Event or
Public Company Liquidation Event, the Corporation shall mail a notice to
each holder of shares of Series A Preferred Stock stating:
(i) that the Other Liquidation Event Offer is being made
pursuant to this Section 10 and that all shares of Series A Preferred Stock
tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall
be at least 30 but no more than 60 days from the date on which the
Corporation mails notice of the Other Liquidation Event or Public Company
Liquidation Event (the "Other Liquidation Event Payment Date");
(iii) that any shares of Series A Preferred Stock not
accepted for payment and purchased pursuant to the Other Liquidation Event
Offer will continue to accrue dividends as provided in this Certificate of
Designation;
(iv) that, unless the Corporation defaults in the payment of
the Other Liquidation Event Payment, all shares of Series A Preferred Stock
accepted for payment pursuant to the Other Liquidation Event Offer shall
cease to accrue dividends after the Other Liquidation Event Payment Date;
(v) that holders of shares of Series A Preferred Stock
electing to have any or all shares of Series A Preferred Stock purchased
pursuant to a Other Liquidation Event Offer shall be required to surrender
the shares of Series A Preferred Stock to the Corporation or its designated
agent for such purpose, at the address specified in the notice prior to the
close of business on the third Business Day preceding the Other Liquidation
Event Payment Date; and
(vi) that holders of shares of Series A Preferred Stock will
be entitled to withdraw their election if the Corporation or its designated
agent for such purpose, receives, not later than the close of business on
the second Business Day preceding the Other Liquidation Event Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the name
of the holder of shares of Series A Preferred Stock, the number of shares
of Series A Preferred Stock delivered for purchase, and a statement that
such holder is withdrawing his election to have such shares purchased.
(c) On the Other Liquidation Event Payment Date, the Corporation
shall, to the extent lawful, (i) accept for payment all shares of Series A
Preferred Stock tendered pursuant to the Other Liquidation Event Offer and
(ii) deposit with the Paying Agent an amount equal to the payment due in
accordance with paragraph (a) of this Section 10 in respect of all shares
of Series A Preferred Stock so tendered. The Corporation shall promptly
pay, in cash or by wire transfer of immediately available funds, to each
holder of shares of Series A Preferred Stock so tendered the Other
Liquidation Event Payment for such shares. The Corporation shall publicly
announce the results of the Other Liquidation Event Offer on or as soon as
practicable after the Other Liquidation Event Payment Date.
SECTION 11. CERTAIN COVENANTS.
(a) Any registered holder of Series A Preferred Stock may proceed
to protect and enforce its rights and the rights of such holders by any
available remedy by proceeding at law or in equity to protect and enforce
any such rights, whether for the specific enforcement of any provision in
this Certificate of Designation or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
(b) So long as any of the Series A Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly
and annual financial reports with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act, the Corporation will furnish the holders
of the Series A Preferred Stock with reports containing the same
information as would be required in such reports.
SECTION 12. DEFINITIONS.
For the purpose of this Certificate of Designation of Series A
Convertible Preferred Stock, the following terms shall have the meanings
indicated:
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in New York City, New York are
authorized or obligated by law or executive order to close.
"Commission" shall mean the Securities and Exchange Commission.
"Conversion Date" shall have the meaning as set forth in Section
8(b) hereof.
"Conversion Price" shall mean the Initial Conversion Price,
subject to adjustment as provided in Section 8.
"Current Market Price," shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation
or any other issuer which are publicly traded, the average of the
daily Market Prices of the Common Stock for fifteen consecutive
Trading Days immediately preceding the date for which such value is to
be computed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Exchange
Act shall include reference to the comparable section, if any, of any
such successor federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or
any other class of capital stock or securities of the Corporation or
any other issuer which are publicly traded, the Current Market Price
of such shares or securities. The "Fair Market Value" of any security
which is not publicly traded or of any other property shall mean the
fair value thereof as determined by an independent investment banking
firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors or a committee
thereof and reasonably acceptable to holders of a majority of the
shares of Series A Preferred Stock.
"Initial Conversion Price" shall have the meaning as set forth in
Section 8(e) hereof.
"Issue Date" shall mean February 23, 2000.
"Junior Stock" shall mean the Common Stock and any other capital
stock or any rights, warrants or other securities convertible into or
exercisable or exchangeable for Common Stock or any other capital
stock of the Corporation ranking junior upon liquidation, dissolution
or winding up) to the Series A Preferred Stock.
"Liquidation Preference" with respect to a share of Series A
Preferred Stock shall mean (i) $20.496 (as adjusted for any stock
dividends, splits, combinations and similar events with respect to
such share of Series A Preferred Stock) (the "Initial Liquidation
Preference"), plus (ii) an amount equal to dividends thereon which
shall be deemed to cumulate and accrue from and after the Issue Date
on the then current Liquidation Preference of such share at a rate of
8% per annum, compounding semi-annually on each six-month anniversary
of the Issue Date, through and including the date on which all
payments required to be made hereunder on such share are made in
respect of any Liquidation or earlier redemption or repurchase by the
Corporation or conversion of such share of Series A Preferred Stock;
provided that upon the occurrence and during the continuance of any
default by the Corporation in respect of its payment obligations in
favor of the Series A Preferred Stock hereunder (including any default
arising from the Corporation not having funds legally available to
effect its obligation), the aforesaid dividend rate shall be 10%
rather than 8%.
"Market Price" when used with reference to shares of Common Stock
or other securities on any date, shall mean (i) if such Common Stock
or other security is listed or authorized for trading on any national
securities exchange, the closing price of such Common Stock or other
security on such date, (ii) if such shares of Common Stock or other
security are not so listed, the price of the last trade, as reported
on the Nasdaq National Market, not identified as having been reported
late to such system, or (iii) if such shares of Common Stock or other
securities are so traded as provided in clause (ii), but not so
quoted, the average of the last bid and ask prices, as those prices
are reported on the Nasdaq National Market, or (iv) if such shares of
Common Stock or other securities are not listed or authorized for
trading on a national securities exchange or the Nasdaq National
Market or any comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association
of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose. If the Common Stock or such other
securities are not publicly held or so listed or publicly traded,
"Market Price" shall mean the Fair Market Value per share of Common
Stock or of such other securities as determined in good faith by the
Board of Directors based on an opinion of an independent investment
banking firm experienced in the valuation of such securities selected
in good faith by the Board of Directors or a committee thereof and
reasonably acceptable to holders of a majority of the shares of Series
A Preferred Stock.
"Other Liquidation Event" shall mean the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation and other
than pursuant to a Liquidation), in one or more related transactions,
of all or substantially all of the properties and assets of the
Corporation and its subsidiaries taken as a whole to any Person (as
such term is used in Section 13(d)(3) of the Exchange Act), (ii) the
consummation of any transaction or other event (including, without
limitation, any acquisition of shares, merger or consolidation) other
than a Public Company Liquidation Event, the result of which is that
any "Person" or "Group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of
all shares that such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of shares of capital stock representing or
convertible, exercisable or exchangeable for more than 50% of the
voting power of the Corporation, and (iii) any event which would
result in a Conversion Price adjustment pursuant to the third sentence
of Section 8(f)(iv) assuming for these purposes that the percentage of
market capitalization referred to therein was 25%.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, fully diluted shares of Common Stock (calculated as
prescribed by generally accepted accounting principles), except shares
then owned or held by or for the account of the Company or any
subsidiary thereof and except options shall not be included until the
same are exercised.
"Parity Stock" shall mean any capital stock or any rights,
warrants or other securities convertible into or exercisable or
exchangeable for shares of any capital stock of the Corporation
ranking on a parity (upon liquidation, dissolution or winding up) with
the Series A Preferred Stock.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Public Company Liquidation Event" shall mean the consummation of
any transaction or other event the result of which is the same as
described in clause (ii) of the definition of Other Liquidation Event
and in which the consideration to be paid to the holders of Common
Stock of the Corporation consists solely of common shares of a
corporation which has an aggregate public float (immediately prior to
such transaction) and as determined by multiplying the Current Market
Price of the common shares of such corporation by the aggregate number
of such common shares then outstanding and not held by affiliates of
such corporation) of at least $250 million, provided that such shares
are (A) either listed or authorized for trading on a national
securities exchange or on the Nasdaq National Market and (B) freely
tradeable without restriction by the holders of common shares.
"Securities Purchase Agreement" shall mean that certain agreement
dated as of February 9, 2000 among the Corporation and the purchasers
party thereto.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange or
the Nasdaq National Market, a day on which such exchange or the Nasdaq
National Market is open for the transaction of business.
<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and on
behalf of Optika Inc., have hereunto subscribed their names on this
23rd day of February, 2000.
OPTIKA INC.
By: /s/ Steven M. Johnson
----------------------------
Name: Steven M. Johnson
Title: Vice President
Attest:
By: /s/ Mark K. Ruport
----------------------------
Name: Mark K. Ruport
Title: President
EXHIBIT 4
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among Jeanne C. Logozzo (the "Management Stockholder") and
Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle
(AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the six month anniversary of the date hereof,
the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2 being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii), (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: None
---------------
Management Stockholder Option Shares: 100,000
---------------
By: /s/ Jeanne C. Logozzo
------------------------------------------------------
Management Stockholder
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
<PAGE>
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among Steven M. Johnson (the "Management Stockholder") and
Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle
(AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the six month anniversary of the date hereof,
the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2(a) being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii), (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
(b) Limited Transfer Exemption. Notwithstanding any other
provision of this Agreement to the contrary, Steven M. Johnson may transfer
up to 40,000 Shares during the six month period following the date hereof.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: 1,000
---------------
Management Stockholder Option Shares: 230,636
---------------
By: /s/ Steven M. Johnson
------------------------------------------------------
Management Stockholder
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
<PAGE>
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among Marc R. Fey (the "Management Stockholder") and Thomas
Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI),
L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P. and TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the six month anniversary of the date hereof,
the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2(a) being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii), (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
(b) Limited Transfer Exemption. Notwithstanding any other
provision of this Agreement to the contrary, Marc R. Fey may transfer up to
40,000 Shares during the six month period following the date hereof.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: 115,000
---------------
Management Stockholder Option Shares: 90,000
---------------
By: /s/ Marc R. Fey
-----------------------------------------------------
Management Stockholder
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
<PAGE>
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among James Hale (the "Management Stockholder") and Thomas
Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI),
L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the six month anniversary of the date hereof,
the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2 being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii) , (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: None
---------------
Management Stockholder Option Shares: 200,000
---------------
By: /s/ James Hale
------------------------------------------------------
Management Stockholder
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
<PAGE>
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among Thomas M. Rafferty (the "Management Stockholder") and
Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle
(AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the six month anniversary of the date hereof,
the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2 being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii), (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: None
---------------
Management Stockholder Option Shares: 120,000
---------------
By: /s/ Thomas M. Rafferty
------------------------------------------------------
Management Stockholder
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
<PAGE>
MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among Mark K. Ruport (the "Management Stockholder") and
Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle
(AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners
Employee Fund, L.P. and TWP 2000 Co-Investment Fund, L.P. (collectively,
"Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
which provides, among other things, for the acquisition by Purchasers of
certain securities of the Company upon the terms and subject to the
conditions set forth therein (capitalized terms used herein and not
otherwise defined have the meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchasers have requested that the Management
Stockholder make certain agreements with respect to the shares of Common
Stock owned of record or beneficially (including shares of Common Stock
issuable upon the exercise of any outstanding options) by the Management
Stockholder as of the date hereof or acquired hereafter (the "Shares"),
upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements
with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying
options indicated next to the Management Stockholder's signature below are
all of the Shares owned of record or beneficially by the Management
Stockholder as of the date hereof. Except as otherwise provided herein,
from the date hereof until the one year anniversary of the date hereof, the
Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment,
hypothecation, encumbrance, tender or other disposition of, any Shares (a
"Transfer") without the consent of the Purchasers. This restriction on
Transfers will terminate automatically if the Management Stockholder's
employment with the Company terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management
Stockholder, or
(ii) a trust solely for the benefit of the
Management Stockholder, any spouse, parent, issue (in
direct line of descent), brother or sister of the
Management Stockholder, or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled
by the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts,
(the person or persons to which the Shares are transferred in accordance
with this Section 2(a) being herein referred to as the "Permitted
Transferee"); provided, that, for any Transfer to the Permitted Transferee
to be effective hereunder, (1) the Permitted Transferee (which, in the case
of a trust, shall include each person having authority to sell or dispose
of such Shares proposed to be transferred to the trust) shall agree with
the Purchasers in writing to be bound by all the terms of this Agreement
applicable to the Management Stockholder as if the Permitted Transferee
originally had been a party to this Agreement; and (2) all of the holders
of any interest in any Entity Permitted Transferee shall agree with the
Purchasers in writing not to transfer any interest they then own or may
hereafter acquire in the Entity Permitted Transferee except to a person
described in paragraph (i), (ii), (iii) or (iv) above with has made the
same agreement in writing to the Purchasers, so long as the Entity
Permitted Transferee shall own any shares of Shares. Any reference herein
to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the Transfer is effected in accordance with this
Section 2.
(b) Limited Transfer Exemption. Notwithstanding any other
provision of this Agreement to the contrary, Mark K. Ruport may Transfer up
to 40,000 Shares during the six month period following the date hereof and
up to an additional 40,000 Shares within the six month period thereafter.
3. Holdoff Agreement. For so long as the Management Stockholder
owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the
Management Stockholder agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertible into or
exchangeable or exercisable for such securities, during the period
commencing thirty days prior to and ending 90 days after the effective date
of any underwritten demand registration or any underwritten piggyback
registration under the Registration Rights Agreement to be entered into
among the Purchasers and the Company and the other parties thereto.
4. Specific Performance. The Management Stockholder acknowledges
and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury
would be caused to the Purchasers for which money damages would not be an
adequate remedy. In such event, the Management Stockholder agrees that the
Purchasers shall have the right, in addition to any other rights they may
have, to specific performance of this Agreement. Accordingly, if the
Purchasers should institute an action or proceeding seeking specific
enforcement of the provisions hereof, the Management Stockholder hereby
waives the claim or defense that the Purchasers have an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the
claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns.
6. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such subject matter. This
Agreement may be amended only in writing.
7. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute
one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: 10,000
--------------
Management Stockholder Option Shares: 433,646*
--------------
By: /s/ Marc K. Ruport
-------------------------------------------------------
Management Stockholder
- ----------------------
* An additional 176,354 options are controlled by his former spouse and
are not beneficially owned by the Management Stockholder.
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
EXHIBIT 5
EXECUTION COPY
--------------
WARRANT AGREEMENT
Dated as of February 23, 2000
by and between
OPTIKA INC.,
THOMAS WEISEL CAPITAL PARTNERS, L.P.
and
THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS*
- ---------------------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
Page
SECTION 1. DEFINITIONS...................................................1
SECTION 2. WARRANT CERTIFICATES..........................................3
SECTION 3. ISSUANCE OF WARRANTS..........................................3
SECTION 4. EXECUTION OF WARRANT CERTIFICATES.............................4
SECTION 5. REGISTRATION..................................................4
SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES.......................4
SECTION 7. TERMS OF WARRANTS; EXERCISE OF WARRANTS.......................6
SECTION 8. PAYMENT OF TAXES..............................................7
SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATES.....................7
SECTION 10. RESERVATIONS OF WARRANT SHARES...............................8
SECTION 11. ADJUSTMENT OF NUMBER OF WARRANT SHARES.......................8
(a) Initial Exercise........................................8
(b) Adjustment to Exercise Price for Stock Dividends
and for Combinations or Subdivisions of
Common Stock.........................................9
(c) Adjustment in connection with Reclassification
and Reorganization..................................13
(d) No Amendments..........................................13
(e) Voluntary Increases....................................13
(f) When Issuance or Payment May Be Deferred...............14
(g) Form of Warrants.......................................14
(h) Other Dilutive Events..................................14
(i) Adjustment in Warrant Shares...........................14
SECTION 12. FRACTIONAL INTERESTS........................................15
SECTION 13. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS.......15
SECTION 14. OBTAINING STOCK EXCHANGE LISTINGS...........................16
SECTION 15. NOTICES TO THE COMPANY......................................16
SECTION 16. SUPPLEMENTS AND AMENDMENTS..................................17
SECTION 17. SUCCESSORS..................................................17
SECTION 18. TERMINATION.................................................17
SECTION 19. GOVERNING LAW...............................................17
SECTION 20. BENEFITS OF THIS AGREEMENT..................................17
SECTION 21. HEADINGS....................................................17
SECTION 22. SUBMISSION TO JURISDICTION..................................18
SECTION 23. WAIVER OF JURY TRIAL........................................18
SECTION 24. SERVICE OF PROCESS..........................................18
SECTION 25. COUNTERPARTS................................................18
EXHIBIT A. FORM OF WARRANT CERTIFICATE................................A-1
EXHIBIT B. FORM OF TRANSFER...........................................B-1
<PAGE>
WARRANT AGREEMENT, dated as of February 23, 2000, by and between
OPTIKA INC., a Delaware corporation (the "Company"), and Thomas Weisel
Capital Partners, L.P., a limited partnership organized under the laws of
Delaware ("TWCP") and the entities listed on the signature pagers hereto
(each such entity and TWCP, a "Purchaser" and collectively with TWCP, the
"Purchasers").
RECITALS
--------
WHEREAS, the Company has entered into a Securities Purchase
Agreement, dated as of February 9, 2000 (the "Purchase Agreement"), with
the Purchasers, pursuant to which the Company has agreed to sell to the
Purchasers (i) an aggregate of 731,851 shares of Series A Convertible
Preferred Stock, par value $0.001 per share (the "Preferred Stock") of the
Company, and (ii) warrants (the "Warrants") to purchase up to an aggregate
of 307,298 shares (subject to adjustment as provided in Section 11 hereof),
exercisable at any time at an exercise price of $22.448 per share, of the
Company's Common Stock, par value $.001 per share (the "Common Stock"), and
(the shares of Common Stock issuable on exercise of the Warrants being
herein called the "Warrant Shares");
WHEREAS, the parties hereto desire to enter into this Agreement
in order to set forth the terms and conditions of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms will
have the respective meanings:
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" and all references thereto means this Agreement as it
may from time to time be amended or supplemented.
"Board of Directors" means the board of directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in New York City, New York are
authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the first paragraph
of this Agreement.
"Conversion Right" shall have the meaning set forth in Section 7
hereof.
"Current Market Price," shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Company or any
other issuer which are publicly traded, the average of the daily Market
Prices of the Common Stock for the fifteen consecutive Trading Days
immediately preceding the date for which such value is to be computed.
"Exercise Price" shall have the meaning set forth in Section 7
hereof.
"Exercise Rate" shall have the meaning set forth in Section 11
hereof.
"Expiration Date" shall have the meaning set forth in Section 7
hereof.
"Fair Market Value" shall mean, as to shares of Common Stock or
any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the Current Market Price of such shares
or securities. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair value thereof
as determined by an independent investment banking firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors or a committee thereof and reasonably acceptable to
holders of a majority of the Warrant Shares.
"Issue Date" shall mean February 23, 2000.
"Market Price" when used with reference to shares of Common Stock
or other securities on any date, shall mean (i) if such Common Stock or
other security is listed or authorized for trading on any national
securities exchange, the closing price of such Common Stock or other
security on such date, (ii) if such shares of Common Stock or other
security are not so listed, the price of the last trade, as reported on the
Nasdaq National Market, not identified as having been reported late to such
system, or (iii) if such shares of Common Stock or other securities are so
traded as provided in clause (ii), but not so quoted, the average of the
last bid and ask prices, as those prices are reported on the Nasdaq
National Market, or (iv) if such shares of Common Stock or other securities
are not listed or authorized for trading on a national securities exchange
or the Nasdaq National Market or any comparable system, the average of the
closing bid and asked prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If the Common Stock or such other securities are
not publicly held or so listed or publicly traded, "Market Price" shall
mean the Fair Market Value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors based on
an opinion of an independent investment banking firm experienced in the
valuation of such securities selected in good faith by the Board of
Directors or a committee thereof and reasonably acceptable to holders of a
majority of the Warrant Shares.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, fully diluted shares of Common Stock (calculated as prescribed
by generally accepted accounting principles), except shares then owned or
held by or for the account of the Company or any subsidiary thereof and
except options shall not be included until the same are exercised.
"Person" means any individual, firm, corporation, partnership or
other entity and shall include any successor (by merger or otherwise of
such entity).
"Purchasers" shall have the meaning set forth in the first
paragraph of this Agreement.
"Register Office" shall have the meaning set forth in Section 6
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange or the
Nasdaq National Market, a day on which such exchange or the Nasdaq National
Market is open for the transaction of business.
"Transfer Agent" shall have the meaning set forth in Section 10
hereof.
"Transfer Notice" shall have the meaning set forth in Section 6
hereof.
"Warrant holder(s)" or "holders of Warrant certificates" means,
in each case, registered holders of Warrant certificates.
"Warrants" shall have the meaning set forth in the Recitals.
"Warrant Shares" shall have the meaning set forth in the
Recitals.
SECTION 2. WARRANT CERTIFICATES.
The Warrant certificates to be issued and delivered pursuant to
this Agreement shall be in registered form only and shall be substantially
in the form set forth in Exhibit A attached hereto.
SECTION 3. ISSUANCE OF WARRANTS.
The Company, simultaneously with the Closing (as defined in the
Purchase Agreement), shall deliver to the Purchasers duly executed Warrant
certificates registered in the name of the Purchasers for the purchase of
an aggregate of 307,298 shares of Common Stock, with each Purchaser
receiving Warrant certificates for the purchase of the number of shares of
Common Stock set forth opposite the name of such Purchaser on Schedule A to
the Purchase Agreement.
SECTION 4. EXECUTION OF WARRANT CERTIFICATES.
Warrant certificates evidencing Warrants to purchase initially an
aggregate of up to 307,298 shares of Common Stock shall be duly executed,
on the date of this Agreement, by the Company and delivered to the
registered holder of the Warrants in accordance with the provisions of
Section 3 hereof. Warrant certificates shall be signed on behalf of the
Company by any two authorized officers. Each such signature upon the
Warrant certificates may be in the form of a facsimile signature and may be
imprinted or otherwise reproduced on the Warrant certificates and, for that
purpose, the Company may adopt and use the facsimile signature of any
person who shall have been an authorized officer, notwithstanding the fact
that at the time the Warrant certificates shall be delivered or disposed of
such person shall have ceased to hold such office. In case any officer of
the Company who shall have signed any of the Warrant certificates shall
cease to hold such office before such Warrant certificates shall have been
an authorized officer delivered or disposed of by the Company, such Warrant
certificates nevertheless may be delivered or disposed of as though such
person had not ceased to hold such office. Any Warrant certificate may be
signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant certificate, shall be a proper officer of the
Company to sign such Warrant certificate, although at the date of the
execution of this Agreement such person did not hold such office.
SECTION 5. REGISTRATION.
The Company shall number and register the Warrant certificates in
a register as they are issued by the Company. The Company may deem and
treat the registered holder(s) of the Warrant certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other
writing thereon made by anyone), for all purposes, and the Company shall
not be affected by any notice to the contrary.
SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES.
The Company shall cause to be kept at its principal corporate
office (the "Register Office") a register in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for
the registration of Warrant certificates and of transfers or exchanges of
Warrant certificates at the Warrant holder's option. The Company shall from
time to time register the transfer of any outstanding Warrant certificates
upon the records to be maintained by it for that purpose, upon surrender
thereof. Upon any such registration of transfer, a new Warrant certificate
shall be issued to the transferee(s) and the surrendered Warrant
certificate shall be canceled by the Company. Canceled Warrant certificates
shall thereafter be disposed of in a manner satisfactory to the Company in
accordance with any applicable laws. Whenever any Warrant certificates are
surrendered for exchange, the Company shall execute and deliver the Warrant
certificates that the Warrant holder making the exchange is entitled to
receive. All Warrant certificates issued upon any registration of transfer
or exchange of Warrant certificates shall be the valid obligations of the
Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement, as the Warrant certificates surrendered for such
registration of transfer or exchange. Every Warrant certificate surrendered
for registration of transfer or exchange shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of
transfer in the form of Exhibit B attached hereto, duly executed by the
Warrant holder or his attorney duly authorized in writing. No service
charge will be made for any registration of transfer or exchange upon
surrender of Warrant certificates or any issuance of Warrant certificates
pursuant to Section 3 or this Section 6, but the Company may require
payment of a sum sufficient to cover any stamp or other governmental charge
or tax which may be imposed in connection with any such transfer or
exchange. Any Warrant certificate when duly endorsed in blank (with
signature guaranteed) shall be deemed negotiable. The holder of any Warrant
certificate duly endorsed in blank may be treated by the Company and all
other Persons dealing therewith as the absolute owner thereof for any
purpose and as the Person entitled to exercise the rights represented
thereby, or to the transfer thereof on the register of Warrants maintained
by the Company, any notice to the contrary notwithstanding; but until such
transfer on such register, the Company may treat the registered Warrant
holder as the owner for all purposes. In addition to any other legend which
may be required by applicable law, each Warrant certificate representing
Warrants and each certificate representing Warrant Shares issued upon
exercise of the Warrant shall have endorsed, to the extent appropriate,
upon its face the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION
FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF
SECURITIES, INCLUDING RULE 144 PROVIDED, IF SO
REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL IS
FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS
AVAILABLE.
Prior to any transfer or attempted transfer of any Warrants, the
holder of such Warrants shall give 10 days' prior written notice (a
"Transfer Notice") to the Company of such holder's intention to effect such
transfer, describing the manner and circumstances of the proposed transfer,
and, if requested by the Company, obtain from counsel to such holder, who
shall be reasonably satisfactory to the Company, an opinion that the
proposed transfer of such Warrants may be effected without registration
under the Securities Act. After receipt of the Transfer Notice and opinion,
the Company shall, within five days thereof, so notify the holder of such
Warrants and such holder shall thereupon, subject to compliance with the
other restrictions on transfer contained herein, be entitled to transfer
such Warrants, in accordance with the terms of the Transfer Notice. Each
Warrant issued upon such transfer shall bear the restrictive legends set
forth above, unless, in the opinion of counsel to such holder (which
opinion must be reasonably satisfactory to the Company and its counsel),
such legend is not required in order to ensure compliance with the
Securities Act. The holder of the Warrants giving the Transfer Notice shall
not be entitled to transfer such Warrants until receipt of notice from the
Company under this Section 6.
SECTION 7. TERMS OF WARRANTS; EXERCISE OF WARRANTS.
Subject to the terms of this Agreement, the Warrants may be
exercised at any time after the date hereof in whole and from time to time
in part until 5:00 p.m. (ET) on February 23, 2008 (the "Expiration Date").
Each Warrant, when exercised in accordance with the terms hereof and upon
payment in cash of the exercise price of $22.448 per share (the "Exercise
Price") will entitle the holder thereof to acquire from the Company (and
the Company shall issue to such holder of a Warrant) one fully paid and
nonassessable share of the Company's authorized but unissued Common Stock
(subject to adjustment as provided in Section 11). No cash dividend shall
be paid to a holder of Warrant Shares issuable upon the exercise of
Warrants unless such holder was, as of the record date for the declaration
of such dividend, the record holder of such Warrant Shares.
A Warrant may be exercised upon surrender to the Company at the
Register Office of the certificate or certificates evidencing the Warrants
to be exercised with the form of election to purchase on the reverse
thereof duly filled in and signed, together with payment to the Company of
the Exercise Price for each Warrant Share then exercised.
In lieu of payment of the Exercise Price pursuant to the
preceding paragraph, the Warrant holder shall have the right to require the
Company to convert the Warrants, in whole or in part and at any time or
times (the "Conversion Right"), into shares of Common Stock by surrendering
to the Company the certificate or certificates evidencing the Warrant to be
converted with the form of notice of conversion on the reverse thereof duly
filled in and signed. Upon exercise of the Conversion Right, the Company
shall deliver to the Warrant holder (without payment by the holder of the
Warrant of any Exercise Price) that number of shares of Common Stock which
is equal to the quotient obtained by dividing (x) the value of the number
of Warrants being exercised at the time the Warrants are exercised
(determined by subtracting the aggregate Exercise Price for all such
Warrants immediately prior to the exercise of the Warrants from the
aggregate Current Market Price (as defined in Section 11) of that number of
Warrant Shares purchasable upon exercise of such Warrants immediately prior
to the exercise of the Warrants (taking into account all applicable
adjustments pursuant to Section 11) by (y) the Current Market Price of one
share of Common Stock immediately prior to the exercise of the Warrants.
Subject to the provisions of Section 8 hereof, upon surrender of
the Warrant certificate or certificates, the Company shall issue and
deliver with all reasonable dispatch, to or upon the written order of the
Warrant holder and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of Warrant Shares
issuable or other securities or property to which such holder is entitled
hereunder upon the exercise of such Warrants, including, at the Company's
option, any cash payable in lieu of fractional interests as provided in
Section 12 hereof. Such certificate or certificates shall be deemed to have
been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the
date of the surrender of such Warrants and payment of the Exercise Price.
The Company may issue fractional shares of Common Stock upon exercise of
any Warrants in accordance with Section 12 hereof.
The Warrants shall be exercisable on or prior to the Expiration
Date, at the election of the holders thereof, either at any time in whole
or from time to time in part (in whole shares) and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all
of the Warrant Shares issuable on exercise of such certificate at any time
prior to the Expiration Date, a new certificate evidencing the remaining
Warrant or Warrants will be issued, and the Company will duly execute and
deliver the required new Warrant certificate or certificates pursuant to
the provisions of Section 4 and this Section 7.
All Warrant certificates surrendered upon exercise of Warrants
shall be canceled by the Company. Such canceled Warrant certificates shall
then be disposed of in a manner satisfactory to the Company and in
accordance with any applicable law. The Company shall account promptly in
writing with respect to Warrants exercised and all monies received for the
purchase of the Warrant Shares through the exercise of such Warrants. In
the event that the Company shall purchase or otherwise acquire Warrants,
the Company may elect to have the Warrants canceled and retired. The
Company shall keep copies of this Agreement and any notices given or
received hereunder available for inspection by the registered Warrant
holders during normal business hours and upon reasonable notice at the
Register Office.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all taxes and other governmental charges
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay
any such taxes or charges which may be payable in respect of any transfer
involved in the issue of any Warrant certificates or any certificates for
Warrant Shares in a name other than that of the registered holder of a
Warrant certificate surrendered upon the exercise of a Warrant, and the
Company shall not be required to issue or deliver such Warrant certificates
unless or until the Person or Persons requesting the issuance thereof shall
have paid to the Company the amount of such taxes or charges or shall have
established to the satisfaction of the Company that such taxes or charges
have been paid.
SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATES.
In case any of the Warrant certificates shall be mutilated, lost,
stolen or destroyed, the Company may in its discretion issue in exchange
and substitution for and upon cancellation of the mutilated Warrant
certificate, or in lieu of and substitution for the Warrant certificate
lost, stolen or destroyed, a new Warrant certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant certificate and indemnity and security
therefor, if requested, also reasonably satisfactory to the Company.
Applicants for such substitute Warrant certificates shall also comply with
such other reasonable regulations and pay such other reasonable charges as
the Company may prescribe.
SECTION 10. RESERVATIONS OF WARRANT SHARES.
The Company (i) shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum
number of shares of Common Stock which would then be deliverable upon the
exercise of all outstanding Warrants if all such outstanding Warrants were
then exercisable and (ii) shall not take any action which results in any
adjustment of the number of Warrant Shares if the total number of Warrant
Shares issuable after the action upon the exercise of all of the Warrant
Shares would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for
the purpose of issue upon such exercise.
The transfer agent for the Preferred Stock (which may be the
Company if it is acting as transfer agent) (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will
be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company
will keep a copy of this Agreement on file with the Transfer Agent for any
shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants. The Company will supply
such Transfer Agent with duly executed stock certificates for purposes of
honoring all outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement and the Company will provide or otherwise make
available any cash which may be payable as provided in Section 12 hereof.
The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto which are transmitted to each
Warrant holder pursuant to Section 13 hereof.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants have been duly authorized and will, upon payment
of the Exercise Price or upon the exercise of the Conversion Right and
issuance, be duly and validly issued, fully paid and nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 11. ADJUSTMENT OF NUMBER OF WARRANT SHARES.
(a) Initial Exercise. Each Warrant will initially be exercisable
by the holder thereof into one share of Common Stock at the Exercise Price.
(b) Adjustment to Exercise Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. (i) In case the Company shall
at any time or from time to time after the Closing Date (A) pay a dividend
or make a distribution on the outstanding shares of Common Stock in shares
of Common Stock, (B) subdivide or split the outstanding shares of Common
Stock, (C) combine or reclassify the outstanding shares of Common Stock
into a smaller number of shares or (D) issue by reclassification of the
shares of Common Stock any shares of capital stock of the Company, then,
and in each such case, the Exercise Price in effect immediately prior to
such event or the record date therefor, whichever is earlier, shall be
adjusted so that the holder of any Warrants thereafter exercised shall be
entitled to receive the number of shares of Common Stock or other
securities of the Company which after the happening of any of the events
described above such Warrants would have been exercisable had such Warrants
been exercised immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, split, reclassification or combination, at the close of
business on the day upon which such corporate action becomes effective.
Such adjustment shall be made successively whenever an event listed above
shall occur. No adjustment shall be made pursuant to this clause (i) in
connection with any transaction to which clause (c) applies.
(ii) In case the Company shall issue shares of Common Stock
(or rights, warrants or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) (collectively, "Additional
Shares") after the Closing Date at a price per share (or having a
conversion or exercise price per share) less than the Current Market Price
as of the date of issuance of such shares (or, in the case of convertible
or exchangeable securities, less than the Current Market Price as of the
date of issuance of the rights, warrants or other securities in respect of
which shares of Common Stock were issued), then, and in each such case, the
Exercise Price shall be reduced to an amount determined by multiplying (A)
the Exercise Price in effect on the day immediately prior to the date of
issuance of such Additional Shares by (B) a fraction, the numerator of
which shall be the sum of (1) the number of shares of Common Stock
Outstanding immediately prior to such sale or issue multiplied by the then
applicable Current Market Price per share and (2) the aggregate
consideration receivable by the Company for the total number of shares of
Common Stock so issued (or into or for which the rights, warrants or other
convertible securities may convert or be exercisable or exchangeable), and
the denominator of which shall be the sum of (x) the total number of shares
of Common Stock Outstanding immediately prior to such sale or issue and (y)
the number of Additional Shares issued (or into or for which the rights,
warrants or convertible securities may be converted, exercised or
exchanged), multiplied by the Current Market Price. An adjustment made
pursuant to this clause (ii) shall be made on the next Business Day
following the date on which any such issuance is made and shall be
effective retroactively to the close of business on the date of such
issuance of Additional Shares. For purposes of this clause (ii), the
aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of rights, warrants or convertible
securities shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and
expenses payable to third parties) of all such Common Stock, rights,
warrants and convertible securities plus the aggregate amount (as
determined on the date of issuance), if any, payable upon exercise or
conversion of any such rights, warrants and convertible securities into
shares of Common Stock. If, subsequent to the date of issuance of such
right, warrants or other convertible securities, the exercise or conversion
price thereof is reduced, such aggregate amount shall be recalculated and
the Exercise Price shall be adjusted retroactively to give effect to such
reduction. On the expiration of any option or the termination of any right
to convert or exchange any securities into Additional Shares, the Exercise
Price then in effect hereunder shall forthwith be increased to the Exercise
Price which would have been in effect at the time of such expiration or
termination (but taking into account other adjustments made following the
time of issuance of such securities) had such security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued. In case any portion of the consideration to be received by the
Company shall be in a form other than cash, the Fair Market Value of such
non-cash consideration shall be utilized in the foregoing computation. If
Common Stock is sold as a unit with other securities, the aggregate
consideration received for such Common Stock shall be deemed to be net of
the Fair Market Value of such other securities. The issuance or reissuance
of (i) any shares of Common Stock or rights, warrants or other securities
convertible into shares of Common Stock (whether treasury shares or newly
issued shares) (A) pursuant to a dividend or distribution on, or
subdivision, split, combination or reclassification of, the outstanding
shares of Common Stock requiring an adjustment in the Exercise Price
pursuant to clause (i) of this clause (b); (B) pursuant to any restricted
stock or stock option plan or stock purchase program of the Company
involving the grant of options or rights to acquire Common Stock to
directors, officers and employees and, in the case of options, consultants
and service providers, of the Company and its subsidiaries so long as (x)
the granting of such options or rights has been approved by the Board of
Directors and (y) the aggregate consideration receivable by the Company in
connection with such options shall be no less than fair market value, as
determined by the Board of Directors, and in connection with such rights
under the employee stock purchase plan of the Corporation shall be no less
than 85% of the fair market value, as determined by the Board of Directors,
of the Common Stock underlying such options or rights on the date of grant;
(C) pursuant to any option, warrant, right, or convertible security
outstanding as of the Closing Date, or (ii) the Series A Preferred Stock
issuable pursuant to the Purchase Agreement and any shares of Common Stock
issuable upon conversion or exercise thereof, shall not be deemed to
constitute an issuance of Common Stock or convertible securities by the
Company to which this clause (b)(ii) applies; provided that,
notwithstanding clause (i)(C), the Exercise Price shall be appropriately
reduced to the extent that the number of shares into which any such
security may be converted, exercised or exchanged is increased or the price
therefor is reduced after the Issue Date. No adjustment shall be made
pursuant to this clause (b)(ii) in connection with any transaction to which
clause (c) applies.
(iii) In case the Company shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders
of its Common Stock (or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) entitling such holders to
subscribe for or purchase shares of Common Stock (or securities convertible
into or exercisable or exchangeable for shares of Common Stock) at a price
per share of Common Stock (or having a conversion, exercise or exchange
price per share of Common Stock, in the case of a security convertible
into, or exerciseable or exchangeable for, shares of Common Stock) less
than the Current Market Price on such record date, the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants (or conversion of such convertible securities) shall be deemed to
have been issued and outstanding as of such record date and the Exercise
Price shall be adjusted pursuant to paragraph 11(b)(ii) hereof, as though
such maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or other securities prior to their receipt of such shares of
Common Stock. Such adjustment shall be made successively whenever such
record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire in whole or in part unexercised, or in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this paragraph 11(b)), the Exercise Price shall again be adjusted as
follows: (A) in the event that all of such rights, options or warrants
expire unexercised, the Exercise Price shall be the Exercise Price that
would then be in effect if such record date had not been fixed; (B) in the
event that less than all of such rights, options or warrants expire
unexercised, the Exercise Price shall be adjusted pursuant to paragraph
11(b)(ii) to reflect the maximum number of shares of Common Stock issuable
upon exercise of such rights, options or warrants that remain outstanding
(without taking into effect shares of Common Stock issuable upon exercise
of rights, options or warrants that have lapsed or expired); and (C) in the
event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled, the Exercise
Price shall be adjusted to reflect the Exercise Price which would then be
in effect if such holder had initially been entitled to such changed number
of shares of Common Stock. Notwithstanding the foregoing, in case the
Company shall issue rights, options or warrants ("Stockholder Rights") to
all holders of its Common Stock entitling the holders thereof to subscribe
for or purchase shares of Common Stock, which rights or warrants (i) are
deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of
Common Stock, in each case in clauses (i) through (iii) until the
occurrence of a specified event or event ("Trigger Event"), such
Stockholder Rights shall for purposes of this clause (iii) not be deemed
issued or distributed until the occurrence of the earliest Trigger Event
and the conversion price shall not be reduced until the occurrence of such
earliest Trigger Event.
(iv) In case the Company shall fix a record date for the
making of a distribution to all holders of any class of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of evidences of
indebtedness, assets or other property, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, (A)
the numerator of which shall be the Exercise Price immediately prior to
such distributions less the Fair Market Value of the portion of the assets,
other property or evidence of indebtedness so to be distributed which is
applicable to one share of Common Stock and (B) the denominator of which
shall be the Exercise Price immediately prior to such distributions. Such
adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise Price which would then be
in effect if such record date had not been fixed. An adjustment to the
Exercise Price also shall be made in respect of dividends and distributions
paid exclusively in cash to all holders of any class of Common Stock
(excluding any dividend or distribution in connection with the Liquidation
(as defined in the Certificate of Designation for the Series A Convertible
Preferred Stock of the Company) of the Company and any cash that is
distributed upon a merger, consolidation or other transaction for which an
adjustment pursuant to paragraph 11(c) is made) or in the case where the
Company effects any repurchase of its Common Stock where the sum of (1) all
such cash dividends and distributions made within the preceding 12 months
in respect of which no adjustment has been made and (2) any cash and the
Fair Market Value of other consideration paid in respect of any repurchases
of Common Stock by the Company or any of its subsidiaries within the
preceding 12 months in respect of which no adjustment has been made,
exceeds 5% of the Company's market capitalization (being the product of the
then Current Market Price of the Common Stock times the aggregate number of
shares of Common Stock then outstanding on the record date for such
distribution). The Exercise Price to be in effect after such adjustment
shall be determined by subtracting from the Exercise Price in effect prior
to such adjustment an amount equal to the quotient of (A) the sum of clause
(1) and clause (2) above and (B) the number of shares of Common Stock
outstanding on the date such adjustment is to be determined.
(v) The term "dividend," as used in this clause (b), shall
mean a dividend or other distribution upon the capital stock of the
Company.
(vi) Anything in this clause (b) to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Exercise Price such
that the number of shares of Common Stock receivable upon the exercise of
each Warrant would differ by at least one two-hundredth of one share of
Common Stock, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Exercise Price by at least
one two-hundredth of one share of Common Stock, such change in Exercise
Price shall thereupon be given effect. All calculations under this Section
11 shall be made to the nearest four decimal points.
(vii) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of
Directors of the Company (which may be the firm of independent public
accountants regularly employed by the Company) shall be presumptively
correct for any computation made under this clause (b).
(viii) If the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of
Common Stock issuable upon exercise of the right of Exercise granted by
this clause (b) or in the Exercise Price then in effect shall be required
by reason of the taking of such record.
(ix) If any event occurs as to which the provisions of this
Section 11(b) are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holders of the Warrants in accordance
with the essential intent and principles of such provisions, the Board of
Directors shall make an adjustment in the application of such provisions,
in accordance with such essential intent and principles, so as to protect
such rights of the holders of the Warrants
(c) Adjustment in connection with Reclassification and
Reorganization. In the case of any consolidation or merger or
reclassification in connection therewith of the Company with or into
another corporation (a "Transaction") occurring at any time, each Warrant
then outstanding shall thereafter be exercisable for, in lieu of the Common
Stock issuable upon such conversion prior to consummation of such
Transaction, the kind and amount of shares of stock and other securities
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock for which
such Warrant was exercisable immediately prior to such Transaction. In case
securities or property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this
Section 11 shall be deemed to apply, so far as appropriate and nearly as
may be, to such other securities or property. The Company, or the person
formed by the consolidation or resulting from the merger or which acquires
such assets or which acquires the Company's shares, as the case may be,
shall make provisions in its certificate or articles of incorporation or
other constituent document to establish such rights and such rights shall
be clearly provided for in the definitive transaction documents relating to
such Transaction. The certificate or articles of incorporation or other
constituent document shall provide for adjustments, which, for events
subsequent to the effective date of the certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 11.
The provisions of this Section 11(c) shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(d) No Amendments. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement, but will
at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Warrant holders thereof against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (i) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from
time to time outstanding and (ii) will not take any action which results in
any adjustment of the number of Warrant Shares if the total number of
shares of Common Stock issuable after the action upon the exercise of all
of the Warrants would exceed the total number of shares of Common Stock
then authorized by the Company's certificate of incorporation and available
for the purposes of issue upon such exercise.
(e) Voluntary Increases. The Company may, but shall not be
obligated to, make such increases in the number of Warrant Shares, in
addition to those required by paragraphs (a) through (c) of this Section
11, as it considers to be advisable in order that any event treated for
United States federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients or if that is not possible,
to diminish any income taxes that are otherwise payable because of such
event.
(f) When Issuance or Payment May Be Deferred. In any case in
which this Section 11 shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing
to the holder of any Warrant exercised after such record date the Warrant
Shares and other capital stock of the Company, if any, issuable upon such
exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise
Price and (ii) paying to such holder any amount in cash in lieu of a
fractional share pursuant to Section 13 hereof; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the
event requiring such adjustment.
(g) Form of Warrants. Irrespective of any adjustments in the
Exercise Price or kind of shares or other assets purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares or other
assets as are stated in the Warrants initially issuable pursuant to this
Agreement.
(h) Other Dilutive Events. If any corporate action shall occur as
to which the provisions of this Section 11 are not strictly applicable but
as to which the failure to make any adjustment would adversely affect the
purchase rights or value represented by the Warrants in accordance with the
essential intent and principles of such Section 11 (which are to place the
Warrant holder in a position as nearly equal as possible to the position
the Warrant holder would have occupied had the Warrant holder purchased
shares of Common Stock on the date hereof) then, in each such case, the
Company shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of the
Company) to give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this
Section 11, necessary to preserve, without dilution, the purchase rights
represented by Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to Warrant holders and will make the
adjustments described therein.
(i) Adjustment in Warrant Shares. Except in connection with an
adjustment pursuant to 11(c), upon each adjustment in the Exercise Price of
which a Warrant is exercisable pursuant to this Section 11, the number of
Warrant Shares covered by such Warrant shall be adjusted to equal a number
of shares of Common Stock equal to the number of Warrant Shares before such
adjustment multiplied by a fraction, of which the numerator is the Exercise
Price before giving effect to such adjustment and the denominator of which
is the Exercise Price immediately after giving effect to such adjustment.
SECTION 12. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants, although it may do so in its sole
discretion. If more than one Warrant shall be presented for exercise in
full at the same time by the same holder, the number of full Warrant Shares
which shall be issuable upon the exercise thereof shall be computed on the
basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except
for the provisions of this Section 13, be issuable upon the exercise of any
such Warrants (or specified portion thereof), the Company shall pay to the
Warrant holder an amount in cash equal to the Market Price per Warrant
Share, as determined on the day immediately preceding the date the Warrant
is presented for exercise, multiplied by such fraction, computed to the
nearest whole cent.
SECTION 13. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT
HOLDERS.
Upon any adjustment of the number of Warrant Shares pursuant to
Section 11 hereof, the Company shall promptly thereafter (i) file with the
Register Office a certificate of the Senior Financial Officer of the
Company (unless the Purchasers request a certificate of a firm of
independent public accountants of recognized standing selected by the Board
of Directors (who may be the regular auditors of the Company)) setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment, upon exercise of a Warrant and (ii) give to each of the
registered holders of the Warrant certificates at its address appearing on
the Warrant register written notice of such adjustments by first-class
mail, postage prepaid. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be mailed under
the other provisions of this Section 13.
In case the Company shall authorize:
(a) the issuance of any dividend or other distribution on the
Common Stock, whether in cash, capital stock, or other securities,
evidences of indebtedness or other property; or
(b) any action which would require an adjustment of the number of
Warrant Shares pursuant to Section 11 hereof; or
(c) any tender offer or exchange offer by the Company for shares
of Common Stock, or Common Stock open market repurchase program; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Register Office and shall
give to each of the registered holders of the Warrant certificates at the
address appearing on the Warrant register, a written notice by first-class
mail, postage prepaid, at least 20 days (or 10 days in any case specified
in clause (b) above) prior to the applicable record date hereinafter
specified, or, in the case of events for which there is no record date, at
least 20 business days before the effective date of such event or the
commencement of such tender offer, exchange offer, or repurchase program.
Any written notice provided pursuant to this Section 13 shall state (i) the
date as of which the holders of record of shares of Common Stock are
entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the commencement date of any tender offer,
exchange offer or repurchase program for shares of Common Stock, or (iii)
the date on which any such consolidation, merger, conveyance, transfer,
reclassification, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such consolidation, merger, conveyance, transfer, reclassification,
dissolution, liquidation or winding up. The failure to give the notice
required by this Section 13 or any defect therein shall not affect the
legality or validity of any issuance, right, option, warrant, distribution,
tender offer, exchange offer, repurchase program, consolidation, merger,
conveyance, transfer, reclassification, dissolution, liquidation or winding
up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
certificates shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice of meetings of
stockholders or the election of Directors of the Company or any other
matter, or any other rights of stockholders of the Company, including any
right to receive dividends. In addition, the holders of Warrant
certificates shall have no preemptive rights and shall not be entitled to
share in the assets of the Company in the event of the liquidation,
dissolution or winding up of the Company's affairs.
SECTION 14. OBTAINING STOCK EXCHANGE LISTINGS.
The Company shall also from time to time take all action
reasonably necessary so that the Warrant Shares, immediately upon their
issuance upon the exercise of Warrants, will be listed on or quoted on the
Nasdaq National Market or any securities exchange or interdealer quotation
system within the United States, if any, on which other shares of Common
Stock are then listed or quoted.
SECTION 15. NOTICES TO THE COMPANY.
Any notice or demand authorized by this Agreement to be given or
made by the Company or by the registered holder of any Warrant certificate
to the Company shall be sufficiently given or made when deposited in the
mail, first class or registered, postage prepaid, addressed, as follows:
Optika Inc.
7450 Campus Drive, 2nd Floor
Colorado Springs, CO 80920
Attention: Chief Financial Officer
SECTION 16. SUPPLEMENTS AND AMENDMENTS.
The Company may from time to time supplement or amend this
Agreement without the approval of any holders of Warrant certificates in
order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or
desirable and which shall not in any way adversely affect the interests of
the holders of Warrant certificates. Any amendment or supplement to this
Agreement that has an adverse effect on the interests of holders of Warrant
certificates shall require the written consent of registered holders of
two-thirds of the then outstanding Warrants. The consent of each holder of
a Warrant affected shall be required for any amendment pursuant to which
the Exercise Price would be increased or the number of Warrant Shares for
or into which a Warrant may be exercised or convertible would be decreased.
SECTION 17. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 18. TERMINATION.
This Agreement shall terminate on the earlier of date on which
all Warrants have been exercised or after 5:00 p.m. (ET) on the Expiration
Date.
SECTION 19. GOVERNING LAW.
THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 20. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
Person other than the Company and the registered holders of Warrant
certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company and the registered holders of the Warrant certificates.
SECTION 21. HEADINGS.
The descriptive headings of the several Sections and paragraphs
of this Agreement inserted for convenience only, do not constitute a part
of this Agreement and shall not affect in any way the meanings or
interpretation of this Agreement.
SECTION 22. SUBMISSION TO JURISDICTION.
If any action, proceeding or litigation shall be brought by the
Purchaser or any holder of Warrants in order to enforce any right or remedy
under this Agreement, the Company hereby consents and will submit, and will
cause each of its subsidiaries to submit, to the jurisdiction of any state
or federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this Agreement.
The Company hereby irrevocably waives any objection, including, but not
limited to, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of
any such action, proceeding or litigation in such jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL.
THE PARTIES TO THIS AGREEMENT HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE WARRANTS.
SECTION 24. SERVICE OF PROCESS.
Nothing herein shall affect the right of any holder of a Warrant
or Warrant Share to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Company in
any other jurisdiction.
SECTION 25. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
OPTIKA INC.
By:/s/ Steven M. Johnson
-------------------------------
Name: Steven M. Johnson
Title: CFO
<PAGE>
PURCHASERS
- ----------
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
[Purchasers' Signature Page -- Warrant Agreement]
<PAGE>
PURCHASERS
- ----------
RKB CAPITAL, L.P.
By: /s/ Peter Schleider
------------------------------
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Warrant Agreement]
<PAGE>
EXHIBIT A
Form of Warrant Certificate
[Face]
No. ____
Warrant Certificate
OPTIKA INC.
This Warrant Certificate certifies that _____________, or
registered assigns, is the registered holder of Warrants (the "Warrants")
to purchase an aggregate of _________ shares of Common Stock, par value
$.001 per share (the "Common Stock"), of OPTIKA INC. a Delaware corporation
(the "Company"). Each Warrant entitles the holder upon exercise to purchase
from the Company at any time after the date hereof a fully paid and
nonassessable share of Common Stock (a "Warrant Share") upon surrender of
this Warrant Certificate and payment in full for such Warrant Share at the
Register Office of the Company, subject to the conditions set forth herein
and in the Warrant Agreement referred to on the reverse hereof. The number
of Warrant Shares purchasable upon exercise thereof are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof, which provisions shall
for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless authenticated
by countersignature of the Warrant Agent, as such term is used in the
Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
EXERCISABLE AT ANY TIME UNTIL THE EXPIRATION DATE.
<PAGE>
IN WITNESS WHEREOF, Optika Inc. has caused this Warrant
Certificate to be signed by its President and Vice President each by a
facsimile of his signature, and has caused a facsimile of its corporate
seal to be affixed hereunto or imprinted hereon.
Dated:
OPTIKA INC.
By:
----------------------------
By:
----------------------------
[SEAL]
<PAGE>
Form of Warrant Certificate
[Reverse]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE
STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION
UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO
THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants having a term of eight years and
entitling the holder on exercise to receive shares of Common Stock (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant
Agreement, dated as of February 23, 2000 (the "Warrant Agreement"), between
the Company and the other parties thereto, which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and
is hereby referred to for a description of the rights, limitation of
rights, obligations, duties and immunities thereunder of the Company and
the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrants. All terms not otherwise defined
herein shall have the meanings set forth in the Warrant Agreement. A copy
of the Warrant Agreement may be obtained by the holder hereof upon written
request to the Company.
Warrants may be exercised at any time after the date hereof in
whole and from time to time in part until the Expiration Date. The holder
of Warrants evidenced by this Warrant Certificate may exercise such
Warrants by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed,
together with payment to the Company of the Exercise Price for each Warrant
then exercised. In lieu of payment of the Exercise Price pursuant to the
preceding sentence, the holder of the Warrants may convert the Warrants, in
whole or in part and at any time or times, into shares of Common Stock by
surrendering to the Company this Warrant Certificate with the form of
notice of conversion set forth hereon properly completed and executed. In
the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the number of Warrant Shares may, subject to certain
conditions, be adjusted. The Company will not be required to issue
fractional Warrant Shares on the exchange of Warrants, although it may do
so in its sole discretion. If fractional shares are not issued, the Company
will pay the cash value of such fractional shares as determined in
accordance with the provisions of the Warrant Agreement.
Warrant certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in
the manner and subject to the limitations provided in the Warrant
Agreement, but without payment of any service charge, for another Warrant
certificate or Warrant certificates of like tenor evidencing in the
aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this
Warrant certificate at the office of the Company, a new Warrant certificate
or Warrant certificates of like tenor and evidencing in the aggregate a
like number of Warrants shall be issued to the transferee(s) in exchange
for this Warrant certificate, subject to the limitations provided in the
Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary. Neither the Warrants nor this
Warrant certificate entitles any holder hereof to any rights of a
stockholder of the Company.
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant certificate, to receive ____________ shares of
Common Stock and hereby tenders for payment for such shares to the order of
Optika Inc. in the amount of $____________ in accordance with the terms
hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________________________, whose
address is _________________________________ and that such shares be
delivered to ______________________________ whose address is
________________________.
If said number of Warrant Shares is less than all of the shares
of Common Stock purchasable hereunder, the undersigned requests that a new
Warrant certificate representing the remaining balance of such shares be
registered in the name of _________________________, whose address is
__________________________, and that such Warrant certificate be delivered
to __________________________, whose address is _________________________.
--------------------------------
(Signature)
Date:
-----------------
<PAGE>
Form of Notice of Conversion (To Be Executed Upon Conversion of
Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant certificate, to convert Warrants represented
hereby into ________ shares of Common Stock in accordance with the terms
hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________________________, whose
address is _________________________________ and that such shares be
delivered to ______________________________ whose address is
________________________.
If said number of Warrant Shares is less than all of the shares
of Common Stock purchasable hereunder, the undersigned requests that a new
Warrant certificate representing the remaining balance of such shares be
registered in the name of _________________________, whose address is
__________________________, and that such Warrant certificate be delivered
to __________________________, whose address is __________________________.
--------------------------------
(Signature)
Date:
-----------------
<PAGE>
EXHIBIT B
---------
Form of Transfer
(To Be Executed Upon Transfer of Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of this
Warrant certificate hereby sells, assigns and transfers unto the
Assignee(s) named below (including the undersigned with respect to any
Warrants constituting a part of the Warrants evidenced by this Warrant
certificate not being assigned hereby) all of the rights of the undersigned
under this Warrant certificate, with respect to the number of Warrants set
forth below:
Name of Assignee(s) Address Social Security or other Number of Warrants
identifying
number of assignee(s)
and does hereby irrevocably constitute and appoint the Company as the
undersigned's attorney to make such transfer on the register maintained by
the Company for that purpose, with full power of substitution in the
premises.
Date:
- -----------------------------
(Signature of Owner)
- -----------------------------
(Street Address)
- -----------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
- -----------------------------
Name:
Title:
EXHIBIT 6
EXECUTION COPY
--------------
REGISTRATION RIGHTS AGREEMENT
Dated as of February 23, 2000
by and among
Optika Inc.
the Founders and Investors described herein
Thomas Weisel Capital Partners, L.P.
TWP CEO Founders' Circle (AI), L.P.
TWP CEO Founders' Circle (QP), L.P.
Thomas Weisel Capital Partners Employee Fund, L.P.
TWP 2000 Co-Investment Fund, L.P.
and
RKB Capital, L.P.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 23, 2000 (this
"Agreement"), by and between Optika Inc., a Delaware corporation (the
"Company"), the holders of Founders Shares and Investors Shares listed on
the signature pages hereto, and Thomas Weisel Capital Partners, L.P., TWP
CEO Founders' Circle (AI), L.P., TWP CEO Founders' Circle (QP), L.P.,
Thomas Weisel Capital Partners Employee Fund, L.P., RKB Capital, L.P. and
TWP 2000 Co-Investment Fund, L.P., as purchasers (together, the
"Purchasers", and individually, each a "Purchaser").
WHEREAS, the Company proposes to issue and sell (i) an aggregate of
731,851 shares of Series A Convertible Preferred Stock, par value $0.001
per share (the "Preferred Stock") of the Company, the terms of which are
set forth in the Certificate of Designation in the form of Exhibit 2.2 to
the Purchase Agreement (as defined below) and (ii) warrants (the
"Warrants"; and, together with the Preferred Stock, the "Securities") to
purchase an aggregate of 307,298 shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), the terms of which are set
forth in the Warrant Agreement attached in the form of Exhibit 1.2(b) to
the Purchase Agreement;
WHEREAS, as an inducement to the Purchasers to enter into the Purchase
Agreement, and as a condition to the closing of the transactions
contemplated thereby, the Company agreed to provide the Purchasers with
registration rights;
WHEREAS, the Company has previously entered into that certain Amended
and Restated Registration Agreement, dated November 22, 1995, as amended by
the First Amendment thereto dated May 6, 1996 (as so amended, the "Existing
Registration Agreement") pursuant to which the Company has granted to the
holders of Founders' Shares (the "Founders") and the holders of Investors'
Shares (the "Investors") certain registration rights on the terms set forth
herein;
WHEREAS, the Company and the Founders and the Investors who are, or
may after the date hereof become, parties to the Agreement wish to effect
an amendment and restatement of their respective rights and obligations
under the Existing Registration Agreement so that, upon the effectiveness
of such amendment at the Effective Date as set forth in Section 12(m) of
this Agreement (i) the Existing Registration Agreement will terminate and
be of no further force and effect; and (ii) all of the registration rights
of the Founders and the Investors (whether or not signatories hereto) will
thereafter be governed solely by this Agreement;
NOW, THEREFORE, the parties agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
The term "broker-dealer" shall mean any broker or dealer
registered with the Commission under the Exchange Act.
"Closing" shall mean the date of the closing of the issuance and
sale of Securities pursuant to the Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute
for the particular purpose.
"Common Stock" shall have the meaning assigned thereto in the
recitals to this Agreement and shall include any equity securities
issued with respect to the Common Stock in connection with any
recapitalization, reclassification, merger, consolidation or other
reorganization.
"Company" shall have the meaning assigned thereto in the first
paragraph of this Agreement.
"Controlling Person" shall have the meaning assigned thereto in
Section 8(a) hereof.
"Demand Exercise Notice" shall have meaning assigned thereto in
Section 2(a) hereof.
"Demand Registration" shall have meaning assigned thereto in
Section 2(a) hereof.
"Demand Registration Request" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Demand Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Effective Time" shall mean, in the case of (i) a Registration,
the time and date as of which the Commission declares the related
Registration Statement effective or as of which the related
Registration Statement otherwise becomes effective; and (iii) a Market
Making Registration, the time and date as of which the Commission
declares the Market Making Registration Statement effective or as of
which time the Market Making Registration otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Shares, as
applicable, that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Sections 5(a)(ii)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Existing Registration Agreement" shall have the same meaning set
forth in the recitals hereto.
"Founders" shall have the meaning assigned thereto in the
recitals hereto.
"Founders' Shares" shall mean at any time (i) the shares of
Common Stock owned by each of the persons listed as a "Founder" on
Schedule A hereto; (ii) with respect to shares of Common Stock
previously held by a Founder, a transferee of such Founder who
consents to be bound by this Agreement; (iii) any shares of Common
Stock then outstanding that were issued upon exercise of the options
held by such Founder; (iv) any shares of Common Stock then issuable
upon exercise of the options held by such Founder; (v) any shares of
Common Stock then outstanding which were issued as, or were issued
directly or indirectly upon the conversion or exercise of other
securities issued as, a dividend or other distribution with respect to
or in replacement of other Founders' shares and (vi) any shares of
Common Stock then issuable directly or indirectly upon the conversion
or exercise of other securities which were issued as a dividend or
other distribution with respect to or in replacement of other
Founders' Shares; provided, that Founders' Shares shall not include
any shares the sale of which has been registered pursuant to the
Securities Act or sold to the public pursuant to Rule 144 promulgated
by the Commission under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of Founders' Shares
whenever such Person holds a security exercisable for or convertible
into such Founders' Shares, whether or not such exercise or conversion
has actually been effected.
The term "holder" shall mean each of the Purchasers and other
Persons who acquire Registrable Shares from time to time (including
any successors or assigns), in each case for so long as such Person
owns any Registrable Shares.
"Indemnified Person" shall have the meaning assigned thereto in
Sections 8(a) and 8(b).
"Initiating Holders" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Investors" shall have the meaning assigned thereto in the
recitals hereto.
"Investors' Shares" shall mean, at any time (i) the shares of
Common Stock owned by each of the persons listed as an "Investor" on
Schedule B hereto; (ii) shares of Common Stock acquired by an Investor
from a Founder; (iii) any shares of Common Stock then outstanding
which were issued as, or were issued directly or indirectly upon the
conversion or exercise of other securities issued as, a dividend or
other distribution with respect to or in replacement of other
Investors' Shares; and (iv) any shares of Common Stock then issuable
directly or indirectly upon the conversion or exercise of other
securities which were issued as a dividend or other distribution with
respect to or in replacement of other Investors' Shares; provided,
that Investors' Shares shall not include any shares the sale of which
has been registered pursuant to the Securities Act or sold to the
public pursuant to Rule 144 promulgated by the Commission under the
Securities Act. For purposes of this Agreement, a person will be
deemed to be a Holder of Investors' Shares whenever such Person holds
a security exercisable for or convertible into such Investors' Shares
whether or not such exercise or conversion has actually been effected.
"Majority Electing Holders" means, the holders of a majority in
the number of shares of Common Stock elected to be included under such
Registration Statement by the Electing Holders.
"Market Making Period" shall have the meaning assigned thereto in
Section 4(a) hereof.
"Market Making Prospectus" shall mean the prospectus included in
the Market Making Registration Statement relating to offers and sales
of Market Making Securities by TWP in secondary transactions.
"Market Making Registration" shall mean the registration of
Market Making Securities in connection with offers and sales thereof
by TWP in secondary transactions.
"Market Making Registration Statement" shall mean a shelf
registration statement on Form S-3 or other short form registration
statement (which may be the Registration Statement if permitted by the
rules and regulations of the Commission) pursuant to Rule 415 under
the Securities Act or any similar rule that may be adopted by the
Commission providing for the registration of, and the sale on a
continuous or delayed basis in secondary transactions by TWP of, the
Market Making Securities.
"Market Making Request Date" shall have the meaning assigned
thereto in Section 5(a) hereof.
"Market Making Securities" shall mean any of the Common Stock
issued by the Company.
"NASD" shall have the meaning assigned thereto in Section
5(a)(xvii) hereof.
"Notice and Questionnaire" means a Notice of Registration
Statement and Selling Securityholder Questionnaire customary in form
and substance for such a Registration.
"Person" shall mean a corporation, association, partnership,
limited liability company, trust, organization, business, individual,
government or political subdivision thereof or governmental agency or
any other entity.
"Piggyback Registration" shall have the meaning assigned thereto
in Section 3(a) hereof.
"Piggyback Registration Statement" shall have the meaning
assigned thereto in Section 3(a) hereof.
"Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of February 9, 2000, between the Company and the
Purchasers.
"Purchasers" shall have the meaning assigned thereto in recitals
to this Agreement.
"Registrable Shares" shall mean, at any time, (A) the Founders'
Shares, (B) the Investors' Shares and (C) the shares of Common Stock
into or for which the Securities are than convertible or exchangeable,
as the case may be; provided, however, that any such shares of Common
Stock referred to in clauses (A) through (C) above shall cease to be
Registrable Shares when (i) in the circumstances contemplated by
Section 2 (other than Section 2(f)) or Section 3, a Demand
Registration Statement or a Piggyback Registration Statement
registering such shares of Common Stock under the Securities Act has
been declared or becomes effective and such shares of Common Stock
shall have been sold or otherwise transferred by the holder thereof
pursuant to and in a manner contemplated by such effective
Registration Statement; or (ii) the Founders' Shares, the Investors'
Shares or the shares of Common Stock underlying the Founders Shares,
the Investors Shares and the Securities is sold pursuant to Rule 144
or Rule 144A under circumstances in which any legend borne by such
Common Stock relating to restrictions on transferability thereof,
under the Securities Act or otherwise, is removed by the Company or
pursuant to the Warrant Agreement.
"Registration Expenses" shall have the meaning assigned thereto
in Section 6 hereof.
"Requisite Holders" means Requisite Investor Holders or Requisite
Purchaser Holders as the context may require.
"Requisite Investor Holders" means the holders of Investors'
Shares representing at least 70% of the total number of Investors'
Shares then outstanding.
"Requisite Purchaser Holders" means the holders of Securities
representing or covering on conversion or exercise, in the aggregate,
25% or more of the total number of shares of Common Stock issuable on
conversion or exercise of the Securities at the Closing.
"Registration" shall have the meaning assigned thereto in Section
3(a) hereof.
"Registration Statements" shall have the meaning assigned thereto
in Section 3(a) hereof.
"Rule 144," "Rule 144A", "Rule 405" and "Rule 415" shall mean, in
each case, such rule promulgated under the Securities Act (or any
successor provision), as the same shall be amended from time to time.
"Secondary Offer Registration Statement" shall mean (i) any
Registration Statement required to be filed by the Company pursuant to
Section 2 or 3 hereof, and/or (ii) the Market Making Registration
Statement required to be filed by the Company pursuant to Section 4
hereof, in each case, as applicable. As used herein, references to a
Secondary Offer Registration Statement in the singular shall, if
applicable, be deemed to be in the plural.
"Securities" shall have the meaning assigned thereto in the
recitals to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"TWP" shall mean Thomas Weisel Partners Group LLC and its
affiliates.
"Underwriters' Representative" shall mean the managing
underwriter, or, in the case of a co-managed underwriting, the
managing underwriter designated as the Underwriters' Representative by
the co-managers.
"Warrants" shall have the meaning assigned thereto in the
recitals to this Agreement.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of
this Agreement, and the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision.
Section 2. Demand Registration of the Registrable Shares under the
Securities Act.
(a) If either the Requisite Investors Holders or the Requisite
Purchaser Holders shall at any time make a written request (a "Demand
Registration Request") to the Company in compliance with this Section 2,
the Company shall cause to be filed with the Commission a registration
statement (a "Demand Registration Statement") under the Securities Act
covering all or any part of the Registrable Shares (a "Demand
Registration"), as such holders (the "Initiating Holders") shall request in
writing.
(i) Any request made pursuant to this Section 2(a) by Requisite
Purchaser Holders shall be addressed to the attention of the Secretary of
the Company, and shall specify the number of Registrable Shares to be
registered (which shall result in gross proceeds of not less than
$10,000,000, assuming no reduction in the number of Registrable Shares that
may be included in such Demand Registration pursuant to Section 2(e));
provided, however, that the holders of the Registrable Shares (other than
Founders' Shares or Investors' Shares) may request registration of any
amount of such Registrable Shares where such holders request registration
of all of the remaining such Registrable Shares, the intended method of
distribution thereof and that the request is for a Demand Registration
pursuant to this Section 2(a).
(ii) Any request made pursuant to this Section 2(a) by the
Requisite Investor Holders shall be addressed to the Company, and shall
specify the number of Restricted Shares to be registered (which shall
result in gross proceeds of not less than (x) $750,000 if the Registration
is required to be effected on Form S-1 or any similarly long-form
registration statement under the Securities Act (a "Long-Form
Registration") or (y) $250,000 if the Registration may be effected on Form
S-2 or S-3 or any similar short-form registration statement under the
Securities Act (a "Short-Form Registration").
(iii) As promptly as practicable, but no later than ten days
after receipt of a Demand Registration Request, the Company shall give
written notice (the "Demand Exercise Notice") of such Demand Registration
Request to all holders of Registrable Shares. Following a request for a
Demand Registration, the Company shall include in a Demand Registration (x)
the Registrable Shares of the Initiating Holders and (y) the Registrable
Shares of any other holders of Registrable Shares who shall have made a
written request to the Company for inclusion in such registration (which
request shall specify the maximum number of Registrable Shares intended to
be disposed of by such holder) within 30 days after the receipt of the
Demand Exercise Notice. The Company shall, as expeditiously as possible,
use its best efforts to effect such registration under the Securities Act
(including, without limitation, by means of a shelf registration pursuant
to Rule 415 under the Securities Act if so requested and if the Company is
then eligible to use such registration) of the Registrable Shares which the
Company has been so requested to register, for distribution in accordance
with such intended method of distribution by the holders electing to
include Registrable Shares therein.
(b) Following receipt of a request for a Demand Registration, the
Company shall:
(i) file the Demand Registration Statement with the Commission as
promptly as reasonably practicable, and, subject to Section 2(a),
shall use all reasonable efforts to have the Demand Registration
Statement declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need
to prepare current financial statements, conduct due diligence and
complete other actions that are reasonably necessary to effect a
registered public offering; and
(ii) use all reasonable efforts to keep the relevant registration
statement continuously effective, for up to 180 days or until such
earlier date as of which all the Registrable Shares under the Demand
Registration Statement shall have been disposed of in the manner
described in the Registration Statement, or such longer period as in
the judgment of counsel for the underwriters a prospectus is required
by law to be delivered in connection with sales of Registrable Shares
by an underwriter or dealer in accordance with the plan of
distribution included in such Demand Registration Statement ;
provided, however, that such obligation to maintain the continuous
effectiveness of the registration statement shall not apply if such
registration statement is on Form S-1 or an equivalent form which does
not permit incorporation by reference.
(c) (i) The Company shall not be obligated to effect more than three
Demand Registrations by Requisite Purchaser Holders pursuant to Section
2(a) which are Long-Form Registration; provided that the Company shall be
obligated to effect an unlimited number of Demand Registrations by the
Requisite Purchaser Holders pursuant to Section 2(c) which are Short-Form
Registrations. For purposes of the preceding sentence, a Demand
Registration shall not be deemed to have been effected (i) unless a Demand
Registration Statement with respect thereto has become effective, (ii) if
after such Demand Registration Statement has become effective, such Demand
Registration Statement or the related offer, sale or distribution of
Registrable Shares thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the holder
of the Registrable Shares and such interference is not thereafter
eliminated or (iii) if the conditions to closing specified in any
underwriting agreement entered into in connection with such registration
are not satisfied or waived, other than by reason of a failure on the part
of the holder of the Registrable Shares. If the Company shall have complied
with its obligations under this Agreement, a right to demand a registration
pursuant to this Section 2 shall be deemed to have been satisfied upon the
earlier of (x) the date as of which all of the Registrable Shares included
therein shall have been distributed pursuant to the Registration Statement,
and (y) the date as of which such Demand Registration shall have been
continuously effective for a 180-day period or other period specified in
Section 2(b)(ii) following the effectiveness of such Demand Registration
Statement, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
(ii) (x) The holders of Investors' Shares may request two
Long-Form Demand Registrations pursuant to paragraph 2(a) for which the
Company will pay all Registration Expenses. A registration will not count
as a Long-Form Demand Registration under this paragraph (x) until it has
become effective and will not count as a Long-Form Demand Registration
under this paragraph (i) unless the Holders of Investors' Shares initially
requesting such registration are able to register and sell at least 50% of
the Registrable Shares requested to be included in such registration;
provided that in any event the Company will pay all Registration Expenses
in connection with any such registration initiated as a Long-Form Demand
Registration.
(y) In addition to the rights provided by paragraph (x) of
this Section 2(c), if the number of prior Long-Form Demand Registrations
pursuant to such paragraph (x) equals two, the holders of Investors' Shares
shall be entitled to request pursuant to paragraph 2(a) an unlimited number
of additional Long-Form Demand Registrations provided that the holders of
securities to be registered thereunder agree to pay their pro rata share
(as determined in accordance with the number of shares requested to be
registered in such registration) of all associated Registration Expenses in
connection with such registration, whether or not such registration becomes
effective. Notwithstanding the terms of the preceding sentence, if the
failure of a registration initiated pursuant to this paragraph (y) to
become effective is the result of a breach by the Company of any of its
obligations under this Agreement, the Company shall pay all Registration
Expenses in connection with such registration.
(z) In addition to the Long-Form Demand Registrations that
may be requested pursuant to Section 2(a), the holders of Investors' Shares
will be entitled to request pursuant to paragraph 2(a) an unlimited number
of Short-Form Demand Registrations. The Corporation will pay all
Registration Expenses incurred in connection with such registration if the
aggregate offering value of all Registrable Shares requested to be
registered in such registration pursuant to Section 2(a) is reasonably
expected to equal at least $750,000, whether or not such registration
becomes effective. If the aggregate offering value of all Registrable
Shares requested to be registered in such registration pursuant to Section
2(a) is not reasonably expected to equal at least $750,000, the holders of
securities to be registered thereunder shall pay their pro rata share (as
determined in accordance with the percentage of shares requested to be
registered in such registration) of all associated Registration Expenses in
connection with such registration, whether or not such registration becomes
effective. Notwithstanding the terms of the preceding sentence, if the
failure of such registration to become effective is the result of a breach
by the Company of any of its obligations under this Agreement, the Company
shall pay all Registration Expenses in connection with such registration.
(d) In connection with any Demand Registration, the Majority Electing
Holders shall have the right to select the underwriter or underwriters and
manager or managers to administer such offering; provided, however, that
each Person so selected shall be acceptable to the Company in its
reasonable judgment.
(e) If the Underwriters' Representative in connection with any
underwritten offering described in this Section 2 shall have informed the
Company that in its opinion the total number of shares of Common Stock that
the holders of the Registrable Shares, and any other Persons desiring to
participate in such registration, intend to include in such offering is
such as to materially and adversely affect the success and pricing of such
offering, then the Company shall include in such Demand Registration (a)
first, all Registrable Shares requested to be included in such registration
by the Electing Holders of Registrable Shares; provided that if the number
of shares of Common Stock so elected to be included in such registration by
all Electing Holders of Registrable Shares exceeds the number recommended
by the Underwriters' Representative, then the number of Registrable Shares
to be so included in such registration will be reduced pro rata in
accordance with the number of shares requested to be included by each
Electing Holder, to such number recommended by the Underwriters'
Representative; provided, further, that on no more than two occasions if
the Initiating Holders are holders of Purchasers' Shares and on no more
than two occasions if the Initiating Holders are holders of Investors'
Shares, the Initiating Holders may specify that (x) if such Initiating
Holders are holders of Registrable Shares (other than Investors' Shares or
Founders' Shares) (all such non-excluded Registrable Shares, the
"Purchasers' Shares"), such reduction will be effected first by reducing
the number of Investors' Shares pro rata in accordance with the number of
Investors' Shares to be included therein until the number of Investors'
Shares to be so included are reduced to zero and then by reducing the
number of Purchasers' Shares pro rata in accordance with the number of
Purchasers' Shares to be included therein, and (y) if such Initiating
Holders are holders of Investors' Shares, such reduction will be effected
first by reducing the number of Purchasers' Shares pro rata in accordance
with the number of Purchasers' Shares to be included therein until the
number of Purchasers' Shares to be so included is reduced to zero and then
by reducing the number of Investors' Shares pro rata in accordance with the
number of Investors' Shares to be included therein; and (b) second, if all
Registrable Shares so elected to be included by the Electing Holders are so
included, such additional number of shares of Common Stock that the Company
or any other Persons entitled to participate in such registration desire to
include in such registration and that the Underwriters' Representative has
informed the Company may be included in such registration without adversely
affecting the success and pricing of the offering of all Registrable Shares
so requested to be included therein; provided that the number of shares of
Common Stock to be offered for the account of all such other Persons
participating in such registration shall be reduced or limited to the
extent necessary so that the total number of shares of Common Stock
requested to be included in such offering does not exceed the maximum
number of shares of Common Stock recommended by such Underwriters'
Representative.
(f) Notwithstanding anything herein to the contrary, the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 2 if (i) the Board of
Directors determines in the exercise of its reasonable judgment that
effecting such Demand Registration at such time would require disclosure of
a material fact that the Board determines in good faith would have a
material adverse effect on any proposal or plan by the Company or any of
its subsidiaries to engage in a significant transaction, then, in which
case the Company may defer such Demand Registration for a single period not
to exceed 90 days once every 12 months and (ii) in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification
or compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
Section 3. Piggyback Registration.
(a) If at any time the Company proposes to register (including for
this purpose a registration effected by the Company for the account of the
Company or shareholders of the Company other than the holders of the
Registrable Shares, whether or not pursuant to the Existing Registration
Agreement) shares of Common Stock or securities convertible or exercisable
into shares of Common Stock under the Securities Act in connection with the
public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement
or successor forms), as soon as practicable (but in no event less than 10
business days prior to the date of filing any related Registration
Statement), the Company shall promptly give the holders of the Registrable
Shares written notice of such registration (a "Piggyback Registration,"
and, collectively with a Demand Registration, a "Registration"). Upon the
written request of the holders of the Registrable Shares given within 10
days following the date of such notice, the Company shall use all
reasonable efforts to cause to be included in such registration statement
(a "Piggyback Registration Statement," and, collectively with the Demand
Registration Statement, the "Registration Statements"), and use all
reasonable efforts to cause to be registered under the Securities Act all
the Registrable Shares that the holders of the Registrable Shares shall
have requested to be registered. The Company shall have the absolute right
to withdraw or cease to prepare or file any Piggyback Registration
Statement for any offering referred to in this Section 3 without any
obligation or liability to the holder of the Registrable Shares; provided,
that the Company shall promptly notify the holders of the Registrable
Shares in writing of any such action.
(b) If the Piggyback Registration Statement relates to an underwritten
offering of Common Stock or securities convertible or exercisable into
shares of Common Stock for the account of the Company and if the
Underwriters' Representative of such underwritten offering shall inform the
Company that in its opinion the inclusion in such underwritten distribution
of all or a specified number of such Registrable Shares or of any other
shares of Common Stock requested to be included therein would materially
and adversely effect the success and pricing of such offering or of such
distribution then the Company shall include in such Piggyback Registration
(a) first, all shares of Common Stock requested to be included in such
registration for the account of the Company, (b) second, all Registrable
Shares requested to be included therein by holders of Founders Shares, and
(c) third, all Registrable Securities requested to be included therein by
the holders of Purchasers' Shares and Investors' Shares, provided that if
the number of Registrable Shares otherwise includable under clause (b) or
(c) above is to be reduced, such number shall be reduced by reducing the
number of Registrable Shares otherwise includable pro rata in accordance
with the number of Registrable Shares requested to be included by the
Holders of Founders' Shares (in the case of clause (b)), and by the holders
of Purchasers' Shares and Investors' Shares (in the case clause (c)). If
the Piggyback Registration Statement relates to an underwritten offering of
Common Stock or securities convertible or exercisable into Common Stock
otherwise than for the account of the Company and if the Underwriters'
Representative of such underwritten offering shall inform the Company that
in its opinion the inclusion in such underwritten distribution of all or a
specified number of such shares of Common Stock to be included therein
would materially and adversely affect the success and pricing of such
offering or of such distribution then the Company shall include in such
Piggyback Registration (a) first, all shares of Common Stock requested to
be included in such registration for the account of the persons (other than
holders of Purchasers' Shares or Investors' Shares) who requested such
registration, (b) second, all Registrable Shares requested to be included
in such Registration by the holders of Purchasers' Shares and Investors'
Shares pro rata in accordance with the number of Registrable Shares
requested be included therein and (c) third, all shares of Common Stock
requested to be included therein for the account of the Company.
The Company may decline to file a Piggyback Registration Statement
referred to in this Section 3(b) after giving notice to the holders of the
Registrable Shares, or withdraw such a Piggyback Registration Statement
after filing, or otherwise abandon any such proposed underwritten offering;
provided that the Company shall promptly notify the holders of the
Registrable Shares in writing of any such action.
(c) The Electing Holders with respect to any Registration may not
participate in any underwritten offering under Sections 2(a) or 3(a) hereof
unless it completes and executes all customary questionnaires (including a
Notice and Questionnaire as contemplated by Section 5(a)(ii)), powers of
attorney, custody agreements, underwriting agreements and other customary
documents required under the terms of such underwriting arrangements (if
any). In connection with any underwritten offering under Sections 2(a) or
3(a), each of the Electing Holders and the Company shall be a party to the
underwriting agreement with the underwriters and may be required to make
certain customary representations and warranties (in the case of the
Electing Holders as to the Registrable Shares being sold by the Electing
Holder in such underwritten offering and the plan of distribution thereof)
and provide certain customary indemnifications for the benefit of the
underwriters.
(d) The holders of the Registrable Shares shall be entitled to have
their Registrable Shares included in an unlimited number of Piggyback
Registrations pursuant to this Section 3.
(e) Notwithstanding the foregoing the Company shall not be obligated
to take any action pursuant to this Section 3 in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification
or compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
Section 4. Registration of Registrable Shares under a Market Making
Shelf Registration Statement.
The Company agrees with TWP that if TWP and the Company mutually agree
that TWP or an affiliate should act as a market-maker with respect to
Market Making Securities,:
(a) If requested in writing by TWP, at any time that the Purchasers
determine that TWP is or may be deemed to be an affiliate (as defined under
Rule 405) of the Company, the Company shall prepare the Market Making
Prospectus and Market Making Registration Statement in a form approved by
TWP and file such Market Making Prospectus and Market Making Registration
Statement pursuant to the Securities Act not later 60 days after the date
of such request (the "Market Making Request Date"), to make no further
amendment or any supplement to the Market Making Registration Statement or
the Market Making Prospectus during the Market Making Period (as defined
below) which shall be disapproved by TWP promptly after reasonable notice
thereof, to use all reasonable efforts to cause the Market Making
Registration Statement to become effective under the Securities Act 115
days after the Market Making Request Date, to advise TWP, promptly after
the Company receives notice thereof, of the time when the Market Making
Registration Statement, or any amendment thereto, has been filed or becomes
effective during the Market Making Period, or any supplement to the Market
Making Prospectus or any amended Market Making Prospectus has been filed
during such period, and to furnish TWP with copies thereof; to advise TWP,
promptly after the Company receives notice thereof during the Market Making
Period, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any preliminary Market Making
Prospectus or Market Making Prospectus, of the suspension of the
qualification of the Market Making Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Market Making Registration Statement or Market Making
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
preliminary Market Making Prospectus or Market Making Prospectus or
suspending any such qualification during the Market Making Period, to use
promptly its reasonable efforts to obtain the withdrawal of such order (the
period beginning on such date as the Purchasers determine that TWP is or
may be deemed to be an affiliate of the Company and continuing for as long
as may be required under applicable law, in the reasonable judgment of TWP
after consultation with the Company, in order to offer and sell Market
Making Securities as contemplated by the Market Making Prospectus, is
herein called the "Market Making Period");
(b) Promptly from time to time to take such action as TWP may
reasonably request to qualify the Market Making Securities for offering and
sale during the Market Making Period under the securities laws of such
jurisdictions as TWP may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
during such period, provided that in connection therewith the Company shall
not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) To furnish TWP with copies of the Market Making Prospectus in such
quantities as TWP may from time to time reasonably request during the
Market Making Period, and, if at any time during such period any event
shall have occurred as a result of which the Market Making Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made when such Market Making Prospectus is to be delivered during such
period, not misleading, or, if for any other reason it shall be necessary
during such period to amend or supplement the Market Making Prospectus or
to amend the Market Making Registration Statement in order to comply with
the Securities Act, to file under the Exchange Act any document
incorporated by reference in such Market Making Prospectus in order to
comply with the Securities Act or the Exchange Act, to notify TWP
immediately and upon its request to file such document and to prepare and
furnish without charge to TWP as many copies as it may from time to time
during such period reasonably request of an amended Market Making
Prospectus or a supplement to the Market Making Prospectus which will
correct such statement or omission or effect such compliance;
(d) During the Market Making Period, to furnish to TWP copies of all
reports or other communications (financial or other) furnished to
shareholders generally, and to deliver to TWP (i) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the Company
as TWP may from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the Company and
its subsidiaries are consolidated in reports furnished to its shareholders
generally or to the Commission); and
(e) To use its reasonable efforts to furnish or cause to be furnished
to TWP upon its request at reasonable intervals, when the Market Making
Registration Statement or the Market Making Prospectus shall be amended or
supplemented during the Market Making Period, written opinions of counsel
for the Company, a letter from the independent accountants who have
certified the financial statements included in the Market Making
Registration Statement as then amended and certificates of officers of the
Company, in each case in form and substance reasonably satisfactory to TWP,
all to the effect specified in subsection (xvi) of Section 5(a) hereof (as
modified to relate to the Market Making Registration Statement and the
Market Making Prospectus as then amended or supplemented).
Notwithstanding the foregoing provisions, if at any time the Company
determines in the exercise of its reasonable judgment that it is in
possession of material, non-public information that it would not be
required to disclose publicly in the absence of a registration of Market
Making Securities under the Securities Act, the Company may, upon 15
business days' prior written notice to TWP, cease to comply with any of its
obligations under this Section 4, whereupon TWP shall cease using the
Market Making Prospectus or any amendment or supplement thereto until it
receives notice from the Company that it may resume using such document.
Section 5. Registration Procedures.
If the Company files a registration statement pursuant to Sections 2,
3 or 4, the following provisions shall apply:
(a) In connection with the Company's obligations with respect to
any Registration or any Market Making Registration, as applicable, the
Company shall use its best efforts to cause the applicable Secondary Offer
Registration Statement to permit the disposition (x) of Registrable Shares
by the holders thereof in the case of a Registration, and , of Market
Making Securities by TWP, in each case in accordance with the intended
method or methods of disposition thereof provided for in the applicable
Secondary Offer Registration Statement. In connection therewith, the
Company shall, as soon as reasonably possible (or as otherwise specified):
(i) (A) prepare and file with the Commission, as soon as
practicable, but in any case within the time periods specified in
Sections 2, 3 or 4, as applicable, a Secondary Offer Registration
Statement on any form which may be utilized by the Company, which
shall (x) register all the Registrable Shares, in the case of a
Registration Statement, and all of the Market Making Securities, in
the case of a Market Making Registration, and in each case to be
included therein for resale (if applicable) by the holders thereof in
accordance with such method or methods of disposition as may be
specified by the holders of the applicable Registrable Shares or TWP
in the case of a Market Making Registration and (y) be, in the case of
a Market Making Registration, in a form approved by TWP, and (B) use
its commercially reasonable efforts to cause such Secondary Offer
Registration Statement to become effective as soon as practicable
after such filing, but in any case within the time periods specified
in Sections 2, 3 or 4 hereof, as applicable;
(ii) not less than 30 calendar days prior to the Effective Time
of any applicable Registration Statement, mail the Notice and
Questionnaire to the holders of the applicable Registrable Shares; no
holder shall be entitled to be named as a selling securityholder in
any Registration Statement as of the Effective Time thereof, and no
holder shall be entitled to use the prospectus forming a part thereof
for resales of Registrable Shares at any time, unless such holder has
returned a completed and signed Notice and Questionnaire to the
Company by the deadline for response set forth therein; provided,
however, holders of Registrable Shares shall have at least 28 calendar
days from the date on which the Notice and Questionnaire is first
mailed to such holders to return a completed and signed Notice and
Questionnaire to the Company;
(iii) as soon as practicable (A) prepare and file with the
Commission such amendments and supplements to the Secondary Offer
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Secondary
Offer Registration Statement for the period specified in Sections 2, 3
or 4 hereof, as applicable, and as may be required by the applicable
rules and regulations of the Commission and the instructions
applicable to the form of such Secondary Offer Registration Statement,
and, in the case of an amendment to or supplement of the Market Making
Registration Statement, in a form approved by TWP and (B) furnish to
the Electing Holders, in the case of any Registration, and TWP, in the
case of a Market Making Registration, copies of any such supplement or
amendment simultaneously with or prior to its being used or filed with
the Commission;
(iv) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Shares or Market
Making Securities, as applicable, covered by such Secondary Offer
Registration Statement in accordance with the intended methods of
disposition provided for therein by the Electing Holders, in the case
of any Registration, or TWP, in the case of a Market Making
Registration;
(v) provide (A) with respect to any Registration, the Electing
Holders and not more than one counsel for all the Electing Holders;
(B) with respect to a Market Making Registration, TWP and its counsel;
and (C) in either case, the underwriters (which term, for purposes of
this Agreement shall include a Person deemed to be an underwriter
within the meaning of Section 2(11) of the Securities Act), if any,
thereof, the sales or placement agent, if any, therefor, and counsel
for such underwriters or agent, the opportunity to participate in the
preparation of such Secondary Offer Registration Statement, each
prospectus included therein or filed with the Commission and each
amendment or supplement thereto;
(vi) for a reasonable period prior to the filing of such
Secondary Offer Registration Statement, and throughout the applicable
periods specified in Sections 2, 3 or 4 hereof, as applicable, make
available at reasonable times at the Company's principal place of
business or such other reasonable place for inspection by the Persons
referred to in Section 5(a)(v) who shall certify to the Company that
they have a current intention to sell the Registrable Shares pursuant
to any Registration, or Market Making Securities pursuant to the
Market Making Registration, as applicable, such financial and other
information and books and records of the Company, and cause the
officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the judgment of the respective counsel
referred to in such Section 5(a)(v), to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided; however, that each such party shall be required to maintain
in confidence and not to disclose to any other Person any information
or records reasonably designated by the Company as being confidential
until such time as, (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such registration
statement or otherwise), or (B) such Person shall be required so to
disclose such information pursuant to a subpoena or order of any court
or other governmental agency or body having jurisdiction over the
matter or otherwise pursuant to the request of any governmental agency
(only after such Person shall have given the Company prompt prior
written notice of such requirement), or (C) such information is
required to be set forth in such Secondary Offer Registration
Statement or the prospectus included therein or in an amendment to
such Secondary Offer Registration Statement or an amendment or
supplement to such prospectus in order that such Secondary Offer
Registration Statement, prospectus, amendment or supplement, as the
case may be, complies with applicable requirements of the federal
securities laws and the rules and regulations of the Commission and
does not contain an untrue statement of a material fact or omit to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(vii) promptly notify each of the Electing Holders or TWP, as
applicable, any sales or placement agent therefor and any underwriter
thereof (which notification may be made through any managing
underwriter that is a representative of such underwriter for such
purpose) and confirm such advice in writing, (A) when such Secondary
Offer Registration Statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Secondary Offer Registration
Statement or any post-effective amendment, when the same has become
effective, (B) of the receipt of written comments from the Commission
and from the blue sky or securities commissioner or regulator of any
state with respect thereto or any request by the Commission for
amendments or supplements to such Secondary Offer Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Secondary Offer Registration Statement or the
initiation or threatening of any proceedings for that purpose, (D) if
at any time during which such Secondary Offer Registration Statement
is effective the representations and warranties of the Company
contemplated by Section 5(a)(xv) or Section 7 cease to be true and
correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Registrable Shares or the Market Making Securities, as
applicable, for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) if at any time
when a prospectus is required to be delivered under the Securities
Act, such Secondary Offer Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment, or any
document incorporated by reference in any of the foregoing, does not
conform in all material respects to the applicable requirements of the
Securities Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing;
(viii) use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such Secondary
Offer Registration Statement or any post-effective amendment thereto
at the earliest practicable date;
(ix) if requested by any managing underwriter or underwriters,
any placement or sales agent, any Electing Holder or TWP, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent, such Electing Holder or TWP specify should
be included therein relating to the terms of the sale of such
Registrable Shares, or Market Making Securities, as applicable,
including information with respect to the number of Registrable Shares
or other Market Making Securities being sold by TWP, such Electing
Holder, TWP, or agent or underwriter, the offering price of such
Registrable Shares or the Market Making Securities, as applicable, and
any discount, commission or other compensation payable in respect
thereof and the purchase price being paid therefor by such
underwriters, and with respect to any other terms of the offering of
the Registrable Shares, or Market Making Securities, as applicable, to
be sold by such Electing Holder, TWP, or agent or to such
underwriters, as applicable; and to make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(x) furnish to each Electing Holder, TWP, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 5(a)(v) a conformed copy of
such Secondary Offer Registration Statement, each such amendment and
supplement thereto (in each case, including all exhibits thereto (in
the case of an Electing Holder of Registrable Shares, upon request)
and documents incorporated by reference therein) and such number of
copies of such Secondary Offer Registration Statement (excluding
exhibits thereto and documents incorporated by reference therein
unless specifically so requested by such Electing Holder, TWP, or
agent or underwriter, as the case may be) and of the prospectus
included in such Secondary Offer Registration Statement (including
each preliminary prospectus and any summary prospectus), in conformity
in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission
thereunder, and such other documents, as TWP, such Electing Holder,
TWP, agent, if any, and underwriter, if any, may reasonably request in
order to facilitate the offering and disposition of the Registrable
Shares owned by such Electing Holder or the Market Making Securities
owned by TWP, to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such Electing Holder, TWP and
any such agent and underwriter, in each case in the form most recently
provided to such party by the Company, in connection with the offering
and sale of the Registrable Shares or the Market Making Securities
covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto;
(xi) use commercially reasonable efforts to (A) register or
qualify the Registrable Shares, or the Market Making Securities as
applicable, to be included in such Secondary Offer Registration
Statement under such securities laws or blue sky laws of such
jurisdictions as any Electing Holder, TWP and each placement or sales
agent, if any, therefor and each underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Market Making Registration is required to remain effective
under Section 4 or the applicable Registration Statement is required
to remain effective under Sections 2 or 3 above, as applicable, (C)
make reasonably available its employees and personnel (including
senior executive officers of the Company) and otherwise provide
reasonable assistance to the underwriters (taking into account the
requirements of the marketing process) in the marketing of Registrable
Shares in any underwritten offering, including participation in any
road show related thereto, and (D) take any and all other actions as
may be reasonable necessary or advisable to enable each such Electing
Holder and TWP, as applicable, such agent, if any, and such
underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Shares, or the Market Making
Securities, as applicable;
(xii) use commercially reasonable efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, which may be required of the Company or otherwise to
effect any Registration or the Market Making Registration or the
offering or sale in connection therewith or to enable the selling
holder or holders or TWP to offer, or to consummate the disposition
of, the Registrable Shares or the Market Making Securities, as
applicable;
(xiii) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Shares to be sold,
which certificates shall be printed, lithographed or engraved, or
otherwise produced, and which shall not bear any restrictive legends;
and, in the case of an underwritten offering, enable such Registrable
Shares to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to
any sale of the Registrable Shares;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions
relating to indemnification and contribution, and take such other
actions in connection therewith as, in the case of a Registration, the
Requisite Holders, or, in the case of a Market Making Registration,
TWP shall request in order to expedite, or facilitate the disposition
of such Registrable Shares or the Market Making Securities, as
applicable;
(xv) whether or not an agreement of the type referred to in
Section 5(xiv) hereof is entered into and whether or not any portion
of the offering contemplated by such Secondary Offer Registration
Statement is an underwritten offering or is made through a placement
or sales agent or any other entity, (A) make such representations and
warranties to the Electing Holders, TWP and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made in connection with an
offering of common stock pursuant to any appropriate agreement or a
registration statement filed on the form applicable to the
Registration or the Market Making Registration, as applicable; (B)
obtain an opinion of counsel to the Company in customary form and
covering such matters, of the type customarily covered by such an
opinion, as the managing underwriters, if any, and in the case of a
any Registration, as the Electing Holders or, in the case of a Market
Making Registration, as TWP may reasonably request, addressed to such
Electing Holders, TWP and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof and dated the effective
date of such Secondary Offer Registration Statement (and if such
Secondary Offer Registration Statement contemplates an underwritten
offering of a part or all of the Registrable Shares or the Market
Making Securities, as applicable, dated the date of the closing under
the underwriting agreement relating thereto) and the date of filing of
an amendment or supplement to such Secondary Offer Registration
Statement or any other document that is incorporated in such Secondary
Offer Registration Statement by reference and includes financial data
with respect to a fiscal quarter or year, as the case may be (it being
agreed that the matters to be covered by such opinion shall include
the due incorporation and existence of the Company and its
subsidiaries; the qualification of the Company and its subsidiaries to
transact business as foreign corporations; the due authorization,
execution and delivery of the relevant agreement of the type referred
to in Section 5(a)(xiv) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of
the Registrable Shares or the Market Making Securities, as applicable;
the absence of material legal or governmental proceedings involving
the Company or its subsidiaries; the absence of a breach by the
Company or any of its subsidiaries of, or a default under, material
agreements binding upon the Company or any subsidiary of the Company;
the absence of governmental approvals required to be obtained by the
Company in connection with any Registration or the Market Making
Registration, as applicable, the offering and sale of the Registrable
Shares, or the Market Making Securities, as applicable, this Agreement
or any agreement of the type referred to in Section 5(a)(xiv) hereof,
except such approvals as may be required under state securities or
blue sky laws; the material compliance as to form of such Secondary
Offer Registration Statement and any documents incorporated by
reference therein with the requirements of the Securities Act and the
rules and regulations of the Commission thereunder, respectively; and,
as of the date of the opinion and of the Secondary Offer Registration
Statement or most recent post-effective amendment thereto, as the case
may be, the absence from such Secondary Offer Registration Statement
and the prospectus included therein, as then amended or supplemented,
and from the documents incorporated by reference therein (in each case
other than the financial statements and other financial information
contained therein) of an untrue statement of a material fact or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (in
the case of such documents, in the light of the circumstances existing
at the time that such documents were filed with the Commission under
the Exchange Act)); (C) obtain a "cold comfort" letter or letters from
the independent certified public accountants of the Company addressed
to the selling Electing Holders, TWP, the placement or sales agent, if
any, therefor or the underwriters, if any, thereof, dated (i) the
effective date of such Secondary Offer Registration Statement and (ii)
the effective date of any prospectus supplement to the prospectus
included in such Secondary Offer Registration Statement or amendment
or supplement to such Secondary Offer Registration Statement or any
other document that is incorporated in such Secondary Offer
Registration Statement by reference and includes unaudited or audited
financial statements as of a date or for a period subsequent to that
of the latest such statements included in such prospectus (and, if
such Secondary Offer Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Secondary Offer Registration Statement or
post-effective amendment to such Secondary Offer Registration
Statement which includes unaudited or audited financial statements as
of a date or for a period subsequent to that of the latest such
statements included in such prospectus, dated the date of the closing
under the underwriting agreement relating thereto), such letter or
letters to be in customary form and covering such matters of the type
customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may
be reasonably requested, in the case of any Registration, by the
Requisite Holders or, in the case of a Market Making Registration, by
TWP, and, in either case, the placement or sales agent, if any,
therefor and the managing underwriters, if any, thereof, dated the
effective date of such Secondary Offer Registration Statement (and if
such Secondary Offer Registration Statement contemplates an
underwritten offering of a part or all of the Registrable Shares or
the Market Making Securities, as applicable, dated the date of the
closing under the underwriting agreement relating thereto) and the
date of filing of an amendment or supplement to such Secondary Offer
Registration Statement or any other document that is incorporated in
such Secondary Offer Registration Statement by reference and includes
financial data with respect to a fiscal quarter or year, as the case
may be, to evidence the accuracy of the representations and warranties
made pursuant to clause (A) above or those contained in Section 7
hereof and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations
relating to expense reimbursement, indemnification and contribution as
are provided in Sections 6 and 8 hereof;
(xvi) notify in writing each holder of Registrable Shares
affected thereby and TWP, of any proposal by the Company to amend or
waive any provision of this Agreement pursuant to Section 11(j) hereof
and of any amendment or waiver effected pursuant thereto, each of
which notices shall contain the text of the amendment or waiver
proposed or effected, as the case may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Shares or the Market
Making Securities, as applicable, or participate as a member of an
underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and
the By-Laws of the National Association of Securities Dealers, Inc.
("NASD") or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Registrable Shares or the Market
Making Securities, as applicable, or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise,
assist such broker dealer in complying with the requirements of such
Rules and By-Laws, including by (A) if such Rules or By-Laws shall so
require, engaging a "qualified independent underwriter" (as defined in
Rule 2720 (or any successor thereto)) to participate in the
preparation of the Secondary Offer Registration Statement relating to
such Registrable Shares or the Market Making Securities, as
applicable, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Secondary Offer Registration Statement is an underwritten offering or
is made through a placement or sales agent, to recommend the yield of
such Registrable Shares or the Market Making Securities, as
applicable, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 8 hereof (or to such other customary extent as may
be requested by such underwriter), and (C) providing such information
to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair
Practice of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Secondary Offer Registration
Statement, an income statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act (including, at the
option of the Company, Rule 158 thereunder).
(b) In the event that the Company would be required to provide notice
pursuant to Section 5(a)(vii)(F) above to the Electing Holders, TWP, the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof, the Company shall as promptly as reasonably practicable
prepare and furnish to each such Person a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to
purchasers of Registrable Shares or Market Making Securities, as
applicable, such prospectus shall conform in all material respects to the
applicable requirements of the Securities Act and the rules and regulations
of the Commission thereunder and shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Each
Electing Holder and TWP agrees, that upon receipt of any notice from the
Company pursuant to Section 5(a)(vii)(F) hereof, such Electing Holder and
TWP, shall forthwith discontinue the disposition of Registrable Shares or
Market Making Securities, as applicable, pursuant to the Secondary Offer
Registration Statement applicable to such Registrable Shares or Market
Making Securities, as applicable, until such Electing Holder or TWP, as
applicable, shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such Electing Holder or TWP
shall deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such Electing Holder's or TWP's
possession of the prospectus covering such Registrable Shares or Market
Making Securities, as applicable, at the time of receipt of such notice.
(c) In addition to the information required to be provided in a Notice
and Questionnaire by each Electing Holder as to which any Registration is
being effected or to be provided by TWP in connection with the Market
Making Registration pursuant to Section 4, the Company may require an
Electing Holder or TWP, as applicable, to furnish to the Company such
additional information regarding such Electing Holder or TWP and such
Electing Holder's or TWP's intended method of distribution of the
applicable Registrable Shares or Market Making Securities as applicable, as
the Company may from time to time reasonably request in writing, but only
to the extent that such information is required in order to comply with the
Securities Act. Each such Electing Holder and TWP agrees to notify the
Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder or TWP, as the
case may be, to the Company or of the occurrence of any event in either
case as a result of which any prospectus relating to such Registration or
Market Making Registration, as applicable, contains or would contain an
untrue statement of a material fact regarding such Electing Holder or TWP
or such Electing Holder's or TWP's intended method of disposition of the
Registrable Shares or Market Making Securities, as applicable, or omits to
state any material fact regarding such Electing Holder or TWP or such
Electing Holder's or TWP's intended method of disposition of the
Registrable Shares or Market Making Securities, as applicable, required to
be stated therein or necessary to make statements therein not misleading in
light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall
not contain, with respect to such Electing Holder or TWP or the disposition
of the applicable Registrable Shares or Market Making Securities, as
applicable, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
Section 6. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Agreement, including (a) all Commission and any NASD registration, filing
and review fees and expenses, (b) all fees and expenses in connection with
the qualification of the Registrable Shares and the Market Making
Securities, as applicable, for offering and sale under the State securities
and blue sky laws referred to in Section 5(a)(xi) hereof and determination
of their eligibility for investment under the laws of such jurisdictions as
any managing underwriters or the Electing Holders or TWP may designate,
including any fees and disbursements of counsel for the Electing Holders,
TWP or the underwriters in connection with such qualification and
determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to
the foregoing, the expenses of preparing the Registrable Shares or Market
Making Securities, as applicable, for delivery and the expenses of printing
or producing any underwriting agreements, agreements among underwriters,
selling agreements and blue sky or legal investment memoranda and all other
documents in connection with the offering, sale or delivery of Registrable
Shares or Market Making Securities, as applicable, to be disposed of
(including certificates representing the Registrable Shares or the Market
Making Securities), as applicable, (d) messenger, telephone and delivery
expenses relating to the offering, sale or delivery of Registrable Shares
or Market Making Securities, as applicable, and the preparation of
documents referred in clause (c) above, (e) internal expenses (including
all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (f) fees, disbursements and
expenses of counsel and independent certified public accountants of the
Company (including the expenses of any opinions or "cold comfort" letters
required by or incident to such performance and compliance), (g) fees,
disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 5(a)(xviii) hereof, (h) fees, disbursements and
expenses of one counsel for the Electing Holders retained in connection
with any Registration, as selected by the Majority Holders and one counsel
for TWP retained in connection with a Market Making Registration, as
selected by TWP; (i) fees, expenses and disbursements of any other Persons,
including special experts, retained by the Company in connection with such
registration (collectively, the "Registration Expenses"). To the extent
that any Registration Expenses are incurred, assumed or paid by any holder
of Registrable Shares, TWP or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such Person for the full
amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the
holders of the Registrable Shares being registered or TWP, as applicable,
shall pay agency fees and commissions and underwriting discounts and
commissions attributable to the sale of the applicable Registrable Shares,
or Common Stock and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
Section 7. Representations and Warranties.
The Company represents and warrants to, and agrees with, each
Purchaser each of the holders from time to time of Registrable Shares and
TWP that:
(a) Each registration statement covering Registrable Shares or Market
Making Securities, as applicable, and each prospectus (including any
preliminary or summary prospectus) contained therein or furnished pursuant
to Section 5(a) hereof and any further amendments or supplements to any
such registration statement or prospectus, when it becomes effective or is
filed with the Commission, as the case may be, and, in the case of an
underwritten offering of Registrable Shares or Market Making Securities, as
applicable, at the time of the closing under the underwriting agreement
relating thereto, will conform in all material respects to the applicable
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and at
all times subsequent to the Effective Time when a prospectus would be
required to be delivered under the Securities Act, other than (A) from (i)
such time as a notice has been given to the Purchasers, the holders of
Registrable Shares or TWP, as applicable, pursuant to Section 5(a)(vii)(F)
hereof until (ii) such time as the Company furnishes an amended or
supplemented prospectus pursuant to Section 5(b) hereof, or (B) during any
suspension of offering and sale pursuant hereto, each such registration
statement, and each prospectus (including any preliminary or summary
prospectus) contained therein or furnished pursuant to Section 5(a) hereof,
as then amended or supplemented, will conform in all material respects to
the applicable requirements of the Securities Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Shares or TWP, as applicable, expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 7(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
Section 8. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless (i) each of the Electing Holders of Registrable Shares
included in a Registration Statement and TWP as holders of Market Making
Securities included in a Market Making Registration Statement and each
Person who participates as a placement or sales agent or as an underwriter
in any offering or sale of such Registrable Shares or Market Making
Securities, as applicable, (ii) each Person, if any, who controls (within
the meaning of Section 15 or Section 20 of the Exchange Act) any such
Person referred to in clause (i) (any of the Persons referred to in this
clause (ii) being referred to herein as a "Controlling Person") and (iii)
the respective officers, directors, partners, employees, representatives
and agents of any Person referred to in clause (i) or any such Controlling
Person (any such Person referred to in clause (i), (ii) or (iii) referred
to for purposes of this Section 8(a) and Sections 8(c) through 8(e) as an
"Indemnified Person"), against any losses, claims, damages or liabilities,
joint or several, to which or such Indemnified Person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Secondary Offer Registration Statement, or any
preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and will reimburse each such Indemnified Person for any legal
and other expenses reasonably incurred by such Indemnified Person in
connection with investigating or defending any such action or claims as
such expenses are incurred; provided, however, that the Company shall not
be liable in any such case (i) to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any such
Registration Statement, or any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by any
Indemnified Person expressly for use therein or (ii) from the use or
delivery by such Indemnified Person, Controlling Person or underwriter of a
prospectus other than the most current prospectus made available to such
Holder, Controlling Person or underwriter by the Company.
(b) Indemnification by the Holders and any Agents and Underwriters in
Connection with any Registration. The Company may require, as a condition
to including any Registrable Share in any Registration Statement and to
entering into any underwriting agreement with respect thereto, that the
Company shall have received an undertaking reasonably satisfactory to it
from each Electing Holder of such Registrable Shares and from each
underwriter named (if any) in any such underwriting agreement, severally
and not jointly, to indemnify and hold harmless (i) the Company and all
other holders of Registrable Shares, (ii) each Controlling Person of any
Person referred to in clause (i), and (iii) the respective officers,
directors, partners, employees, representatives and agents of any Person
referred to in clause (i) or any such Controlling Person (any Person
referred to in clause (i), (ii) or (iii), referred to for purposes of this
Section 8(b) and Sections 8(c) through 8(e) as an "Indemnified Person")
against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue or
alleged untrue statement of a material fact contained in such Registration
Statement, or any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such Registration Statement, or any
preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein; and will reimburse the Company for any legal and
other expenses reasonably incurred by the Company in connection with
investigating or defending any such actions or claims as such expenses are
incurred; provided, however, that the liability of any Electing Holder
pursuant to this subsection (b) shall not exceed the product of the number
of Registrable Shares sold by such Electing Holder and the initial offering
price therefor as set forth in the prospectus therefor.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an Indemnified Person (as defined under each of subsections (a)
and (b) of this Section 8) of notice of the commencement of any action,
such Indemnified Person shall, if a claim in respect thereof is to be made
against an indemnifying party under such clause, notify such indemnifying
party in writing of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may
have to any Indemnified Person otherwise than under such subsection or to
the extent it is not prejudiced as a proximate result of such failure. In
case any such action is brought against any Indemnified Person and it shall
notify an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such
Indemnified Person (who shall not, except with the consent of the
Indemnified Person, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such Indemnified Person of its
election so to assume the defense thereof, the indemnifying party shall not
be liable to such Indemnified Person under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such Indemnified Person, in connection with the defense thereof
other than reasonable costs of investigation. Notwithstanding the
foregoing, any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless the Indemnified Person shall have been advised by
counsel that representation of the Indemnified Person by counsel provided
by the indemnifying party would be inappropriate due to actual or potential
conflicting interests between the indemnifying party and the Indemnified
Person, including situations in which there are one or more legal defenses
available to the Indemnified Person that are different from or additional
to those available to the indemnifying party; provided, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings
arising out of the same general allegations, be liable for the fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnified Parties, except to the extent that local counsel, in addition
to its regular counsel, is required in order to effectively defend against
such action or proceeding. No indemnifying party shall, without the written
consent of the Indemnified Person, effect the settlement or compromise of,
or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Person
is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the Indemnified Person from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any Indemnified Person.
(d) Contribution. If the indemnification provided for in this Section
8 is unavailable to or insufficient to hold harmless an Indemnified Person
under subsection (a), (b) or (c) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and the Indemnified Person on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party on
the one hand or the Indemnified Person on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties agree that it
would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the
Indemnified Persons were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an Indemnified Person as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Electing Holder shall be required to
contribute any amount in excess of the amount by which the product of
number of Registrable Shares sold by such Electing Holder and the initial
offering price therefor as set forth in the prospectus therefor exceeds the
amount of any damages which such Electing Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no underwriter or sales agent shall be
required to contribute any amount in excess of the amount by which the
total price at which the shares of Common Stock underwritten or placed by
it and distributed to the public were offered to the public exceeds the
amount of any damages which such underwriter or sales agent has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) The obligations of the Company and the Electing Holders under this
Section 9 shall be in addition to any liability which the Company and the
respective Electing Holders may otherwise have.
Section 9. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Shares
covered by the Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be
designated by Majority Holders, provided that such designated managing
underwriter or underwriters is or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Registrable Shares hereby
agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) agrees to sell
such holder's Registrable Shares on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
Section 10. Rule 144 and Rule 144A.
The Company covenants to the holders of Registrable Shares and the
Purchasers that to the extent it shall be required to do so under the
Exchange Act, the Company shall timely file the reports required to be
filed by it under the Exchange Act or the Securities Act (including the
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder, shall make available to each holder of Registrable Shares and
the Purchasers the information required by Rule 144A(d)(4), and shall take
such further action as any holder of Registrable Shares or the Purchasers
may reasonably request, all to the extent required from time to time to
enable such holder to sell Registrable Shares or the Purchasers to sell
Common Stock without registration under the Securities Act within the
limitations of the exemptions provided by Rule 144 or Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or any
similar or successor rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Shares or the
Purchasers in connection with that holder's or the Purchasers' sale
pursuant to Rule 144 or Rule 144A, the Company shall deliver to such holder
or the Purchasers a written statement as to whether it has complied with
such requirements.
Section 11. Holdoff Agreement.
(a) The Company agrees not to effect any public sale or distribution
of equity securities of the Company, including any public sale pursuant to
Rule 144 under the Securities Act, or any securities convertibles into or
exchangeable or exercisable for such securities, (a "Public Sale"), during
the period commencing 30 days prior to and ending 90 days after the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten registration or
pursuant to registration on Form S-8 or any successor form), unless the
underwriters managing the offering otherwise agree.
(b) Each holder of Registrable Shares agrees not to effect any Public
Sale (and in the case of Investors and Purchasers, such holders agree not
to effect a distribution to their respective partners in connection with an
underwritten demand registration in which the Purchasers (in the case of
Investors) or the Investors (in the case of Purchasers) are participating
under this Agreement, provided that the party agreeing not to distribute
shall have received notice of such Registration at least 45 days prior to
the effective date thereof) during the period commencing 30 days prior to
and ending 90 days after the effective date of any underwritten
registration for the account of the Company (except as part of such
underwritten registration or pursuant to registration on Form S-8 or any
successor form) or any Demand Registration, unless, in any such case, the
underwriters managing the offering otherwise agree; provided that the
holders of Investors' Shares shall not be subject to the agreement set
forth in this subsection 11(b) until the first anniversary of the date
hereof; provided further that nothing in this subsection 11(b) shall be
deemed to restrict any distribution by the Investors or Purchasers to their
respective partners of such securities otherwise than as expressly set
forth above or to restrict the sale of such securities by the partners of
the Investors or Purchasers after any such distribution.
(c) The Company agrees to use its commercially reasonable efforts to
cause any underwriters managing an offering referred to in the Existing
Registration Agreement or otherwise to release the holders of Registrable
Shares from any resale restrictions managed by such underwriters with
respect to such offerings no later than and on terms no less favorable to
the holders of Registrable Shares than imposed on other holders of shares
of Common Stock who are so released from such resale restrictions.
Section 12. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Shares, Common Stock or any
other securities which would be inconsistent with the terms contained in
this Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of
its obligations hereunder and that the Purchasers, the holders from time to
time of the Registrable Shares and TWP may be irreparably harmed by any
such failure, and accordingly agree that the Purchasers, such holders and
TWP, in addition to any other remedy to which they may be entitled at law
or in equity, shall be entitled to compel specific performance of the
respective obligations of the Company under this Agreement in accordance
with the terms and conditions of this Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices and communications provided for hereunder
shall be in writing and sent (i) by telecopy if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid); or (ii) by registered or certified mail with
return receipt requested (postage prepaid); or (iii) by a recognized
overnight delivery service (with charges prepaid). Any such notice must be
sent:
If to the Purchasers:
Thomas Weisel Capital Partners, L.P.,
TWP CEO Founders' Circle (AI), L.P.,
TWP CEO Founders' Circle (QP), L.P.,
Thomas Weisel Capital Partners Employee Fund, L.P.,
TWP 2000 Co-Investment Fund, L.P.
c/o Thomas Weisel Capital Partners, L.P.
One Montgomery Street, Suite 3700
San Francisco, CA 95104
Facsimile: (415) 364-2698
Attention: Marianne Winkler
RKB Capital, L.P.
150 West Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 404-9266
Attention: Peter Schleider
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Facsimile: (212) 859-8000
Attention: F. William Reindel, Esq.
If to the Company:
Optika Inc.
7450 Campus Drive, 2nd Floor
Colorado Springs, CO 80920
Facsimile: (719) 531-0199
Attention: Steven Johnson
Vice President and Chief Financial Officer
with copies to:
E* Law Group
3555 W. 110th Place
Westminster, Colorado 80031
Telecopy: (303) 410-0468
Attention: Jeremy W. Makarechian, Esq.
and to:
Morrison & Foerster LLP
370 17th Street, Suite 5200
Denver, Colorado 30202
Telecopy: (303) 592-1510
Attention: Warren Troupe, Esq.
If to any Investor or Founder:
At the address specified for such
Investor or Founder in the Existing
Registration Agreement.
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
(d) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the parties hereto and the holders from time to time of the
Registrable Shares and the respective successors and assigns of the parties
hereto and such holders. In the event that any transferee of any holder of
Registrable Shares shall acquire Registrable Shares, in any manner, whether
by gift, bequest, purchase, operation of law or otherwise, such transferee
shall, without any further writing or action of any kind, be deemed a
beneficiary hereof for all purposes and such Registrable Shares shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Shares such transferee shall be entitled to
receive the benefits of, and be conclusively deemed to have agreed to be
bound by all of the applicable terms and provisions of this Agreement. If
the Company shall so request, any such successor, assign or transferee
shall agree in writing to acquire and hold the Registrable Shares subject
to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made
pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf
of the Purchasers or any holder of Registrable Shares, any director,
officer or partner of the Purchasers or such holder, any agent or
underwriter or any director, officer or partner thereof, or any Controlling
Person of any of the foregoing, and shall survive delivery of and payment
for the Securities pursuant to the Purchase Agreement and the transfer and
registration of Common Stock by such holder or the Purchasers.
(f) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
(g) Waiver of Jury Trial. THE ISSUER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE SECURITIES OR EXCHANGE NOTES.
(h) Submission to Jurisdiction. If any action, proceeding or
litigation shall be brought by the Purchasers or any holder of the
Registrable Shares in order to enforce any right or remedy under this
agreement or any of the Shares, the Company hereby consents and will
submit, and will cause each of its subsidiaries to submit, to the
jurisdiction of any state or federal court of competent jurisdiction
sitting within the area comprising the Southern District of New York on the
date of this Agreement. The Company hereby irrevocably waives any
objection, including, but not limited to, any objection to the laying of
venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any such action, proceeding or litigation
in such jurisdiction.
(i) Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
(j) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understanding between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly executed
by the Company and the holders of at least, in the case of an amendment
that could reasonably be viewed as adversely affecting the rights of the
holders of (A) Purchasers' Shares, then a majority in number of Purchasers'
Shares and (B) Investors' Shares, then 70% of the Investors' Shares and (C)
Founders' Shares, then a majority of Founders' Shares; provided, however,
that any such amendment or waiver affecting solely provisions of this
Agreement relating to the Market Making Registration may be effected by a
written instrument duly executed solely by the Company and TWP. Each holder
of any Registrable Shares at the time or thereafter outstanding shall be
bound by any amendment or waiver effected pursuant to this Section 11(j),
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Shares or is delivered to such holder.
(k) Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders
of Registrable Shares and the addresses of the Purchasers shall be made
available for inspection and copying on any business day to the Purchasers
or any holder of Registrable Shares for proper purposes only (which shall
include any purpose related to the rights of the holders of Registrable
Shares under the Securities and this Agreement) at the offices of the
Company at the address thereof set forth in Section 11(c) above.
(l) Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed by all,
of the parties hereto.
(m) Effective Date. This Agreement shall become effective as between
the Company, the Founders and the Investors upon the execution of the
Agreement as of such date (the "Effective Date") on which the Agreement
(which has already been executed by the Company) shall have been executed
by Investors who hold at least 70% of the Investors' Shares and Founders
who hold at least a majority of the Founders' Shares, whereupon this
Agreement shall be binding upon all Investors and Founders, whether or not
they have executed this Agreement. Notwithstanding anything to the
contrary, regardless of whether or when the Effective Date shall occur,
this Agreement shall be a valid and binding agreement of the Company and
the Purchasers (and any subsequent of holder Registrable Shares which are
not Founders' Shares or Investors' Shares), and until the Effective Date
shall occur, this Agreement shall be deemed to exclude all rights and
obligations of the holders of Founders' Shares and Investors' Shares. As of
the Effective Date, with respect to Frontenac VI Limited Partnership and
JMI Equity Fund L.P. (the "Funds"), that certain Letter Agreement, dated as
of February 8, 2000, by and among the Company, the Funds and the Purchasers
shall terminate.
(n) Future Registration Rights. Except for the registration rights
granted hereunder, the Company will not grant registration rights as to any
equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the written
consent of the holders of at least (A) a majority in number of Purchasers'
Shares and (B) 70% of the Investors' Shares unless (i) any such
registration rights that may be initiated at the demand of the holders of
such rights (each such holder a "New Investor") shall include in such
demand Registrable Shares requested to be included by holders of
Purchasers' Shares and Investors' Shares pro rata in accordance with the
number of shares requested to be included therein by each of the holders of
Purchasers' Shares and Investors' Shares and each of the New Investors, so
long as the holders of a majority of the Purchasers' Shares and 70% of the
Investors' Shares agree to include on a pro rata basis any shares requested
to be included by such New Investor in any Demand Registration of
Registrable Shares initiated by either holders of Purchasers' Shares or
Investors' Shares under Section 2(a) herein (other than a Demand
Registration as to which the holders of Purchasers' Shares or Investors'
Shares, as the case may be, have made the election contemplated by clause
(x) or clause (y) of the second proviso to the first sentence of Section
2(e) not to have any Investors' Shares or Purchasers' Shares, respectively,
included therein on a pro-rata basis), (ii) in the case of any such
registration rights relating to the registration of Common Stock for the
account of the Company, the holders of Registrable Shares hereunder shall
have priority over the holders of any such registration rights and (iii)
any such registration rights granted shall not be any more favorable to the
holders of such registration rights as compared to, or otherwise be
inconsistent with, the rights granted to the holders of Purchasers' Shares
and Investors' Shares hereunder.
<PAGE>
Agreed to and accepted as of the date first above written.
OPTIKA INC.
By: /s/ Steven M. Johnson
---------------------------------
Name: Steven M. Johnson
Title: CFO
[Company's Signature Page - Registration Rights Agreement]
<PAGE>
PURCHASERS
- ----------
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: /s/ Deborah Bernstein
-----------------------------------------------------
Name: Deborah Bernstein
Title: Authorized Signatory
[Purchasers' Signature Page - Registration Rights Agreement]
<PAGE>
PURCHASERS
- ----------
RKB CAPITAL, L.P.
By: /s/ Peter Schleider
----------------------------------
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Registration Rights Agreement]
<PAGE>
INVESTORS
- ---------
Frontenac VI Limited Partnership
By: Frontenac Company
Its: General Partner
By:
-------------------------------
Name:
Title:
JMI Equity Fund, L.P.
By: JMI Partners, L.P.
Its: General Partner
By: /s/ Harry Gruner
-------------------------------
Name: Harry Gruner
Title:
<PAGE>
FOUNDERS:
- ---------
<PAGE>
SCHEDULE A
SCHEDULE OF FOUNDERS
Paul Carter
Harvey Jeane
Malcolm Thomson
Steven Johnson
Mark Ruport
Linda E. Boguslav
Lisa M. Hardiman
Russell A. Johnson
James T. Schuster
David Holzman
Richard Holzman
Kevin Ilsen
Eric Brown
IPRS Asia (s) Pte Ltd
Intuit Development Limited
Gillespie Limited
<PAGE>
SCHEDULE B
SCHEDULE OF INVESTORS
Frontenac VI Limited Partnership
JMI Equity Fund, L.P.
